Modern Portfolio Theory- See Investopedia's definition here.
Risk Tolerance- This is the amount of risk you are able to accept in your account. Understanding your risk tolerance is of the utmost importance to ensure you will be able to stick with your chosen portfolio through the inevitable down markets.
Strategic Allocation- Strategic models are pure “MPT” models, which means they are diversified across many asset classes and the portfolios maintain a certain level of risk though up and down markets. It is important to understand the potential downside risk of a portfolio. Investors should always avoid selling during a major downturn in the market, which again is why we are concerned about risk.
Tactical Allocation- Tactical models are also diversified across many asset classes but instead of holding the portfolio through the down markets a percentage of the portfolio is automatically moved to safe investments during market downturns. The portfolios are evaluated once a month and the level of each asset class is determined independent of the others. We are trying to stay fully invested in those areas that are performing well and reducing our holdings in areas that are underperforming.