Despite the Federal Reserve's efforts to pull off a "soft landing," the specter of an economic decline still looms large, with every small setback roiling markets. So, what's an investor to do?

Sticking to your target portfolio allocations is certainly one option; after all, holding a well-diversified mix of investments has proved to help reduce portfolio volatility over the long haul.

But for investors who feel like they need to do something, a tactical tilt—or reallocation of assets based on short-term market views—could be an attractive solution.

A tactical tilt is most useful when you anticipate significant over- or underperformance in the near term.

For example, if you're worried about . . .

• . . . a recession, you might reduce your exposure to high-yield bonds—which often struggle to make steep interest payments as profits come under pressure—in favor of more recession-resistant options, such as U.S. Treasuries.
• . . . ballooning valuations within certain sectors, you might prioritize those with strong fundamentals—such as energy and utilities—or even reduce your stock exposure in favor of highly rated corporate bonds.
• . . . economic conditions abroad, you might tilt away from, say, a slowing China and toward an accelerating India.
• . . . falling interest rates, which could happen in the next year, you might increase your exposure to longer-duration bonds, which are less susceptible to price declines as rates come down.

As a general guideline, tactical tilts are designed to be made at the margins and should account for no more than 5% to 10% of your total portfolio allocations.

For example, if your target portfolio allocation is 75% stocks and 25% bonds but you're worried the valuation bubble may soon burst, you might reduce your stock exposure to 70% and up your bond exposure to 30%.

Before you make any allocation adjustments, consider a few caveats:

• Attention must be paid: Investors who actively manage their portfolios and regularly monitor the market can more easily take advantage of short-term opportunities—and recalibrate should markets move against them.
• Beware hidden costs: Frequent buying and selling can result in taxes and higher trading fees, which can eat into returns.
• Easy does it: Any tactical shifts should be temporary. Once economic or market conditions have stabilized, you should shift back to your long-term asset allocation.

Finally, be sure you're tactically tilting for the right reasons—that is, based on careful research and robust evidence rather than anxiety about current conditions or fear of what the future may hold.