Don’t Fear the Language – Understand It

The finance world can get complicated, especially for the passive or uninterested investor. Let’s face it, some of us are not curious about sports, movies, exercise, reading, or other things while others of us carry a passion for them. Interest levels also differ in the finance world although the lack of attention here could inflict severe consequences to one’s retirement or lifestyle. Financial preparation and strategizing can foster positive differences in our lives and future.

When hearing terminology associated with other industries, it can easily be ignored, or worse, misinterpreted. “Going into the kitchen” in pickleball has nothing to do with the food industry. Cleaning up the deck will likely elicit a different action plan for a ship’s deckhand versus a businessperson preparing for a presentation.

The finance world is laden with complicated phrases and financial terms. For example, two distinct classifications are associated with investing objectives: tactical and strategic. Tactical investing attempts to capitalize on market inefficiencies, look for short-term opportunities, time market entry spots, and/or outdo benchmark performances with a total return focus. Tactical investing is proactive and can involve quick-changing market positioning.

Strategic investing aligns portfolio holdings based on long-term planning with no required day-to-day reallocation due to data releases or market events. Most conservative investors, including those who have a portion of funds dedicated to tactical investing, practice strategic investing on some level. These investors share the goal of long-term planning and safeguarding hard-earned wealth. Focus is often on income and cash flow consequently deemphasizing total return. Safeguarding wealth takes precedence over potential quick-hit opportunities which may bring sizeable returns although also carry substantial risk.