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VIEWPOINT: Do I need an investment strategy?

‘Investors who don’t have a strategy have been called sheep’ – Investopedia

‘If you don’t have a strategy, you’re part of someone else’s strategy’ – Alvin Toffler

Only 6% of South Africans retire at the same standard of living they previously enjoyed. And about 33% of South Africans still have debt to pay off in retirement. A recent World Bank report put South Africans as some of the biggest borrowers in the world – and we also have one of the lowest savings rates in the world.

Even if we are saving, are we doing it for long enough and for the right returns? How do we avoid being part of the 94% who don’t make it?


Investopedia defines an investment strategy as ‘a set of rules, behaviors or procedures, designed to guide an investor’s selection of an investment portfolio. Individuals have different profit objectives, and their individual skills make different tactics and strategies appropriate. Some choices involve a tradeoff between risk and return. Most investors fall somewhere in between, accepting some risk for the expectation of higher returns.’

Some of these choices involve:

  • Active versus passive management
  • Buy and hold strategies
  • Long versus short strategy

Other choices are: indexing, value, growth and momentum strategies; dividend growth investing; rand cost averaging; and contrarian investing.

David Allison, a founding partner of a private wealth management company in the USA, believes that ‘Great trades may win battles, but a well-thought-out investment strategy wins wars.’ He suggests that you write down your investment strategy as a process. Once your strategy is written, you can look it over to make sure that it matches your long-term investment objectives. Writing down your strategy gives you something to revert back to in times of chaos, which will help you avoid making emotional investment decisions. It also gives you something to review and change if you notice flaws, or your investment objectives change.

You can ask yourself, ‘What makes me smarter than the market?’ Does your investment strategy contain a belief about why investments become over or undervalued? If so, how do you exploit that? Also ask yourself, ‘Will my investment strategy perform well in every market environment?’ If not, when will it perform the worst? There is an old saying on Wall Street, ‘The market can remain irrational longer than you can remain solvent.’

What system do you put in place to measure the effectiveness of your investment strategy? It is difficult to improve or fully understand something that you do not measure. For this reason, you should have a benchmark to measure the effectiveness of your investment strategy. Your benchmark should match your investment objective, which in turn, should match your investment strategy.


  • Do I have a plan?
  • What time frames, returns and volatility must I plan for?
  • What are my benchmarks?
  • How do I monitor the results against these benchmarks?
  • Which structures should I use for these investments?
  • Which investment platforms do I use to manage the investments?
  • What expertise do I have or advice I need?
  • Do I have the time to manage the strategy?
  • How do I protect my wealth along the way?

Mike Lledo CA(SA) is an Associate of Citadel Investment Services