What Are The Two Components Of Successful Investing?

Following a good strategy is important, but it isn’t enough to win.

You need tactics too.

Tactics are the small concrete steps that move you along the path to success. Weak tacticians lack the specific moves required to implement a strategy and never reach their goals.

When I sit down to play a game of chess, I divide my thoughts along two main paths – strategy and tactics. Strategically, I look at the whole board to figure out what overall approach I need to win the game. Tactically, I decide which piece I have to move every turn to gain an advantage in the game.

Apply the same two-pronged approach, using both strategy and tactics, in order to have successful investing.

Strategy: Goal-based investing instead of open-ended investing

Set a goal-oriented strategy for your investments now so that you can build your wealth in the future.

For example, start saving for your child’s college tuition from a very young age. Define your goal to have a set dollar amount to meet tuition bills and other related expenses. Once you’ve set your goal, select the specific investments that can realistically get you there.

This technique can be applied to all goals, big and small, such as going on vacation and saving up for your retirement, to weekly dinner dates or purchasing a new cell phone.

Tactics: Have a well-formulated and comfortable plan of action to follow

Having an investment goal is a general strategy. But you need specific investment tactics so you know how to act on a daily basis.

Setting clear tactics allows you even in times of stress or failure to follow the path you paved out for yourself, without getting sidetracked by unpredictable events. Knowing the moves that you need to make, step by step, keeps you focused on your goal.

However, though you should set out the tactics at the beginning of your plan, remain flexible enough to change them if needed. Every investing strategy contains a certain amount of risk. Periodically re-evaluate the risk of your initial strategy. If it still fits your tolerance for risk and steers you in the right direction, continue with the system.