What defines tactical asset allocation?

Tactical asset allocation is best defined as a dynamic adjustment of the asset mix based on market conditions. This strategy involves actively shifting the proportions of different asset classes within a portfolio to take advantage of perceived market opportunities or to mitigate risks. Practitioners of tactical asset allocation monitor market trends, economic data, and other relevant indicators to make informed decisions about when to increase or decrease exposure to specific assets.

This approach contrasts with a long-term rigid asset mix strategy, which maintains a fixed allocation over time regardless of market movements. Additionally, tactical asset allocation is not a strategy that ignores short-term market predictions; rather, it specifically seeks to capitalize on them. Lastly, while reducing investment risks can be a component of tactical asset allocation, the primary focus is on adjusting the asset mix strategically, rather than aiming to eliminate all types of risk. Thus, option B accurately captures the essence of tactical asset allocation.