Investment strategy is a very broad term:
In a very broad sense, what you do with your savings if there is excess money at the end of the month? A possibility is that you can give up the immediate possession of those savings for a future larger amount of money that will be available for future consumption. This trade-off of present consumption for a higher level of future consumption is a reason for saving. What you do with the savings to create increasing value over time is investing. Those who give up immediate possession of savings expect to receive a future greater amount than they originally gave up. Conversely, those who consume more than their current income must be willing to pay back in the future more than they borrowed.
Investment analysis and portfolio management sixth edition, Reilly, Brown, page 9.
Investment: in its largest description; to put money to use by purchase or expenditures in something offering profitably return of interest or income.
Investment: the investing of money or capital in order to secure profitable returns.
see Random House unabridged dictionary addition 1971
Strategy as in asset allocation: an equity portfolio does not stand in isolation: rather it is part of an investment’s overall investment portfolio. Many times, the equity portion is part of a balanced portfolio that contains holdings in various long and short-term debt securities (such as bonds or treasury bills) in addition to its equities. In such situations the portfolio manager must consider more than just the composition of the equities or the bond components of the portfolio. The manager must also determine the approximate mix of asset categories in the entire portfolio. There are four general strategies for determining the asset mix within a portfolio as follows: integrated, strategic, tactical and insured asset allocation methods.
Investment Analysis and Portfolio Management, Reilly, Brown, page 917.
Strategy; generalship, the science or art of combining and employing the means of the war in planning or directing large military movements and operations.
A plan, a method or a series of maneuvers or stratagems for obtaining a specific goal or result.
See Random House unabridged dictionary addition 1966
Tactic; as a subset of strategy: a system or detail of tactics, a plan of procedure or extended plan for promoting a desired result, arrangement of orders.
Tactic, a subset of strategy, is explained by Sun Tzu 6 century BC Chinese general, military strategist and author of the “Art of War”. “All men can see these tactics whereby I conquer, however: but what none of them can see is the strategy out of which victory involves” (Tzu 19).
It should be noted that in our contemporary investment management world, strategies have evolved immensely in the last 15 years. Modern portfolio theory was the underlying foundation for most portfolios 15 years ago. Subsequently, it has been determined that the underlying standard deviation assumption in modern portfolio theory is flawed, being that the tales of the standard deviation are much fatter than originally believed.
This has led to a very mixed world of investment strategies with little supporting documentation including new strategies of hedge funds, of absolute return and some of the oldest strategies of buy-and-hold or market timing. The largest supporting body of current data would be seen in the arena of momentum investment. At this writing none of these strategies have been shown to have a documented advantage or disadvantage over other strategies.
From the desk of Frank D Tehel, CFP®
Random House Webster’s Unabridged Dictionary. Random House, 1966.
Reilly, Frank K., et al. Investment Analysis and Portfolio Management, Sixth Edition: Solutions Manual. South-Western/Thomson Learning, 2000.
Tzu, Sun. Art of War. 5th Century BC.