Strategy, whether for business, military or political ends, involves the optimal use and deployment of resources in order to achieve an objective. In this Idea, using strategy for wealth creation is explored, in the context of individual investors.
According to an article published in IESE Insight, the conventional approach of investing in stocks and bonds may help to preserve capital, but is not suitable for wealth creation; investment expenses, taxes and inflation all have a real impact, and a different and more innovative approach is necessary.
Researchers from institutions including IESE Business School and the University of St. Gallen suggest that a strategic approach to investment is the better approach. Based on their book, The Empowered Investor: 7 Principles for Strategic Wealth Creation in a New Financial World, they propose a framework of seven interconnected principles to help individual investors take control of their investment decisions:
According to the authors, the true value of this framework becomes evident when you combine all the elements into an overall process, with careful monitoring along the way.
An overreliance on mathematical formulas when it comes to investment decisions is a common yet flawed approach; instead, investors should take control of their investment decisions by focusing on the principles of strategic management. Along with the framework above, a number of questions are also presented in this article that investors should ask themselves. Some of these include the following:
As future events can unfold unexpectedly, questions like these must be asked and answered on an ongoing basis before deciding on any actions to take regarding your investments; only then will you be on the road towards successful wealth creation.
Ideas for Leaders is a free-to-access site. If you enjoy our content and find it valuable, please consider subscribing to our Developing Leaders Quarterly publication, this presents academic, business and consultant perspectives on leadership issues in a beautifully produced, small volume delivered to your desk four times a year.
For the less than the price of a coffee a week you can read over 650 summaries of research that cost universities over $1 billion to produce.
Use our Ideas to:
Speak to us on how else you can leverage this content to benefit your organization. firstname.lastname@example.org