Importance of a strategy

You need a strategy, or more precisely, a number of complementary strategies, to be an effective investor. Choosing a strategy means developing a plan that guides your choice of investments, the way you buy, how long you keep investments in your portfolio, and when you sell.

Without a strategy, you're likely to invest randomly — a stock here, a bond there — without a sense of how your investments can work together to achieve the return you want while helping to control your risk. What's more, much of the long-term success of any portfolio depends on the way its assets are allocated, or distributed, among the range of investment choices.