By Genevieve Cua

IN the midst of the 2008 crisis and shortly in its aftermath, many advisers and strategists shunned the buy-and-hold approach to investments and extolled the virtues of a "tactical" approach, which basically involves actively monitoring and trading a portfolio.

But Jim McCaughan, chief executive of Principal Global Investors, advocates a simpler approach for retail investors.

Simply have a plan that spells out your strategic asset allocation - that is, the percentage weights that should go into equities, bonds, cash and alternative assets.

Then, rebalance the portfolio around those strategic weights.

"Disciplined rebalancing is a theme that's important in the long term; it works for individuals and big funds. This is one of the lessons of the crisis, to set up a plan and be disciplined on rebalancing. That tends to pull you into markets when they're weak, and gets you out when they're strong," he says. US-based Principal Global is part of the Principal Financial Group, which manages roughly over US$280 billion in assets.

Such rebalancing is effectively a form of dollar cost averaging.

"I think it's almost impossible for individuals to be tactical when things are bad. You should be buying when the media says things are bad. In the fourth quarter of 2008 even the best media said to get out of markets, and that was precisely the wrong time. You should buy on bad news and sell on good news."

Tactical allocation also involves market timing, which is difficult to get right.

Most of Principal Global's retail investors have put money into target date funds.

These are long-term retirement funds where the asset allocation shifts towards lower risk assets such as bonds as the portfolio nears its end-date horizon, which coincides with when investors retire.