Market Extra: Why advisers say tactical allocation funds usually aren’t worth the fees

The idea that investors can reduce risk in their portfolios without diminishing future expected returns is perhaps one of the most widely perpetuated myths on Wall Street. Tactical allocation funds, which purport to deliver less risk and higher rewards, are a case in point, according to financial advisers.

“To justify managed allocation funds, one not only needs to believe that it’s possible to beat the market, but it’s also possible to accurately predict which segments of the markets are poised to perform better,” said Scott Hanson, financial adviser and co-chief executive officer at HansonMcClain Advisors.

Actively managed allocation funds seek to minimize losses by tactically shifting asset allocations, with the intent of doing so in time to avoid big market corrections.

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