What is the the difference between tactical asset allocation and security selection?
I think they are both deviations from strategic asset allocation weight based on investment objectives and constraints.
So what is the difference?
Tactical Asset Allocation involves temporarily deviating from the Strategic Asset Allocation, to take advantage of short-term opportunities due to market fluctuations or expected returns from short-term predictions.
Security Selection is one way to accomplish this, by literally picking and choosing securities. It is not the only way of achieving this, however. Tactical Asset Allocation can also be done using the same securities as the SAA, but shifting the weights around temporarily (this is known as “Active Weighting”), or it can also be done with derivatives.