List three key elements of an investment strategy.
an identifiable goal
a method to attain that goal
the competencies and resources to sustain the strategy
What is the difference between investment strategy and investment policy?
Investment policy sets forth the financial goals of the client. Investment strategy is the way(s) of attaining those goals.
Explain the relationship of the investment strategy to the investment policy of a client
Investment strategy must operate within the framework of the client’s investment policy and must always be its servant. Policy sets forth the financial goals of the client as well as the risk parameters within which the client’s assets may be managed. It also defines the categories of assets deemed suitable. Investment strategy works within these parameters to attain those goals. While there is one investment policy for a client, there can be several investment strategies employed for the client. The strategies, however, are consistent with the provisions of the investment policy. The policy can even contain specific strategies to be used or not used, depending on the wishes of the client. It remains for the investment adviser, working with the client, to develop strategies that will reach the stated goals within constraints defined by the policy.
What is the buy-and-hold strategy?
As the name implies, this strategy involves purchasing securities and then patiently keeping those securities for a long period of time, selling only when there is a compelling need to do s
List benefits of the buy-and-hold strategy.
returns at least as good as strategies based on technical analysis,
low transaction costs, the deferral of capital gains taxes on profits,
not missing the best days of the market
How does the efficient market hypothesis support the argument for a buyand-hold strategy
The efficient market hypothesis holds that current market prices reflect all the available information about issuers and the future expectations of their investors; therefore, attempts to invest in undervalued securities, with the inherent buying of undervalued securities and selling overvalued securities, is costly and a waste of time.