FINANCIAL Advisor

Tactical versus Strategic Investing

There are many different philosophies and approaches to investing. The following article will highlight the main characteristics of tactical and strategic investing strategies. Tactical investing (or technical asset alloca – tion) employs an active, opportunistic, and often short-term approach. This approach attempts to opportunistically take advantages of short-term market or economic events in order to try and achieve superior results. Market timing strat – egies are common with tactical investing. This may be done with specific allocation strategies such as shifting between economic sectors. Technical analysis is often used in tactical in –

vesting. Technical analysis evaluates securi – ties primarily on the basis of statistics, such as security price and momentum, in order to try and predict future prices. The goal of technical analysis is not to determine a security's intrin – sic value but rather to recognize chart patterns to determine return prospects for a security. A tactical investment approach is short-term in na – ture, often with investment holding periods that may last months or even weeks. Investors should be aware of current tax rules related to holding periods on investments. Long-term capital gains (realized gains on as – sets held more than one year) are currently taxed at a lower rate than short-term capital gains (re – alized gains on assets held less than a year). This is especially important to note for tactical investors where short-term trade activity if often the norm. Another consideration for tactical in – vestors is that trade costs may erode the longer term value of the portfolio with higher transac – tion volume. Strategic investing employs a much longer "buy-and-hold" strategy. The baseline for a strategic investment portfolio construction is clearly defining ones risk profile, time horizon, and investment objectives so a target allocation of investments can be selected. As different areas of the market ebb and flow, strategic in – vestors will periodically rebalance the portfolio and bring their overall mix of investments back in-line with the targeted goal allocation. These rebalancing moves should be made without emotion nor based on short-term outside influ – ences but rather on the personal financial goals and objectives of that unique investor. A strate – gic investment approach is long-term in nature, often with investment holding periods that may last years or decades.

Strategic investors should ignore the finan – cial media's "talking heads" that encourage viewers to make investment decisions based on the white noise of the day. Allocation changes will be made with a strategically managed port – folio, but these changes will primarily be driven by changes to investor goals and objectives, not headline news stories. An investors strategy can be taken from a tactical or strategic perspective. One method of investment management is not necessarily "bet – ter" or "worse" than another but each method contains its own considerations. If you decide to work with a Financial Advisor with investment management and portfolio construction deci –

sions, it is important to make sure your expec – tations are in-line with that particular advisor's philosophies, methodologies, and expertise. Adam Smit is CERTIFIED FINANCIAL PLANNER™ with Adam Smit Investment Management LLC and a registered principal of LPL Financial. This article is for general infor – mation only and not intended to provide specific advice or recommendations for any individu – al. Securities offered through LPL Financial. Member FINRA/SIPC.

BY ADAM SMIT