By Ian Byrne CFP, GRW Advisory
The Art of War is attributed to an ancient Chinese military theorist and general, Sun Tzu, (meaning ‘Master Sun’) who lived in the 6th century BC. Sun Tzu’s timeless wisdom, originally applied to the battlefield and the economy of warfare, holds equally true for the complex terrain of the investment world.
By understanding and implementing these five strategic laws, investors can possibly gain a successful and significant edge.
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- Know Thyself and Thy Enemy
“If you know the enemy and know yourself, you need not fear the result of a hundred battles” Just as a general must know his own army’s strengths and weaknesses, and those of his enemy, an investor must understand their own tolerance for various market risks, what their own financial goals are (particularly for each investment), and the timeframe they’re aiming for (thyself) as well as managing risks (the enemy). This self-awareness is crucial for making informed and good decisions.
Strategy: Conduct a thorough self-assessment to determine your investment style, whether it’s aggressive, conservative, or a blend. Understand your risk tolerance and time horizon and assess the right opportunities for these. Additionally, stay informed about market indicators, economic environments, geopolitical events and investment-specific circumstances and conditions, all of which can shed important information or have a material impact.
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- In the midst of chaos, there is also opportunity
In warfare, deception and chaos can be a powerful tool to mislead the enemy. Similarly, in investing, it’s essential to avoid being misled and confused and allow emotional decision-making, which can lead to impulsive buying or selling. By remaining calm and disciplined, investors can “outsmart” market noise and capitalize on opportunities.
Strategy: Develop a robust, well thought out investment plan and stick to it. Avoid chasing ‘hot tips’ or panicking during market downturns. Instead, focus on long-term value and let your investment strategy guide your decisions. If your fundamentals are sound and the investment you hold is solid, market downturns (shares, property or any market) can present good opportunities to further bolster your position and profit.
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- Know When to Attack, When to Retreat
A wise general knows when to strike and when to withdraw, when to use archers or cavalry or armour or infantry. In investing, this translates to not only knowing when to buy, sell, or hold but also what structure will serve you best (personal, trust, super, company etc.). Timing can be important but ‘time in’ the market is crucial.
Strategy: It’s essential to be patient and selective but also know when to act and what strategically makes sense (taxation or structural considerations included). Just like a general holds a war council before entering battle, you too should seek sound expert advice from your professional advisers when deciding your best moves, allocations and strategies.
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- The Importance of Logistics
A well-armed & well-supplied army is more likely to win a battle. In investing, this translates to having a solid financial foundation. This includes diversifying your portfolio, managing risk, and having more than adequate cash reserves available at any one given time.
Strategy: Diversify your investments across different asset classes, such as shares, cash, property, infrastructure, and alternatives. An army has to deal with the prospect of fighting on differing terrains and which may be more advantageous. You too should also regularly assess whether you should rebalance your portfolio to maintain a desired asset allocation, or adjust your views to and shift your position to suit the prevailing conditions. Underlying all this however is the logistics of ensuring you’re never left short, and have the ready availability of cash to cover unexpected expenses.
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- The Power of Intelligence
Intelligence gathering is vital for a successful military campaign. In investing, this means staying informed about market conditions, company news, and economic indicators. By staying updated, investors can make informed decisions and capitalize on opportunities.
Strategy: The Art of War specifies the importance of developing good information sources and how to best manage each of them to decide which is the path leading to the best avenue of success. If you are a DIY investor, you also need your sources of intelligence and sound information. Read financial news, follow industry experts, listen to economic commentary and assess which direction makes sense for your circumstances. Consider using financial analysis tools to evaluate investments, track your portfolio’s performance and work out if you’re on the right path. If you’re not wanting to be a DIY investor but know it’s important and these points all made sense, consider appointing your own ‘general’ to marshal your financial resources, and seek an adviser you have confidence in to do the hard yards for you.
By beginning with these five strategic points, investors may be able to start navigating the complex world of finance and investing with greater confidence and success. Like preparing for a war not just a battle, investing is a marathon not a sprint. Patience, discipline, and a long-term perspective are essential for achieving your financial goals (if not world domination).
We support wealthy individuals and family groups by working with you to create a direction, structure, strategy and security for your wealth and a retirement that is right for you, your values and your legacy.
If you require further information on how to get started or any of the above has struck a chord with you, feel free to reach out any way you wish (LinkedIn, telephone, email or other). I have clients all over Australia and the world, and always happy to have an initial discussion without cost or obligation.
*The above is general information only and not personal advice. For further information or a confidential discussion, please contact the author directly.
