3.1 The value of a strategy

What this topic covers:

  1. What is an investment strategy?
  2. Aligning your strategy and goals
  3. Stick to your investment strategy

What is an investment strategy?

Essentially, this is the plan of action that you’re putting into practice to achieve your investment goals.

If you haven’t defined your investment goals yet, be sure to check out topic 2: Your investment goals. This will help you get the most out of this topic and beyond.

There are many different investment strategies, and in this topic, we’ll compare and contrast some of the most common ones. It’s essential to have a full grasp of the different investment strategies and understand why you need to have one before you take the next steps.

Why your investment strategy and goals should be aligned

We’re going to use an example here, as it’s an easy way to demonstrate this point.

  • Victoria’s investment strategy is to invest in stable companies over the medium-term with the aim of steady accumulation to meet her goal of saving for a house deposit

  • Through careful research and investing in good businesses, she’s accumulated a share portfolio worth $60,000, so she’s on her way

  • But her good friend Natalie has a hot share tip – absolutely guaranteed to make a motza overnight!

  • Victoria decides to take $10,000 from her portfolio and invest it in the tip

  • But the company bombs and she ends up losing $8,000

By diverging from her investment strategy, and taking a short-term decision to try and make some quick money, Victoria’s taken a risk that hasn’t paid off. A risk that will end up impacting her long-term investment goal.

The moral of the story? Create an investment strategy that you’re comfortable with, that aligns to your investment goals – and stick to it.

Next Topic: 3.2 Investment strategies and types


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