Strategic vs. Tactical: What's the Difference?

Whether portfolio moves are temporary or long-term can help clarify the issue.

Adam Zoll 20.06.2014
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Question from reader: I often hear the terms "strategic" and "tactical" used in regard to a fund's asset allocation, but I can't say I understand the difference. Can you explain?

Answer: Confusion over the terms "strategic" and "tactical" isn't confined to the world of investing. Although the terms origins come from the battlefield, they are also used to describe actions in other competitive pursuits, including business, sports, and games.

Merriam-Webster defines "strategic" as "of or relating to a general plan that is created to achieve a goal in war, politics, and so on, usually over a long period of time" and "tactical" as "of, relating to, or used for a specific plan that is created to achieve a particular goal in war, politics, and so on." The key distinction here is that the former refers to an overarching, long-term effort whereas the latter refers to a more specific action performed in the service of this larger strategic goal.

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Adam Zoll  Adam Zoll is an assistant site editor with Morningstar.com

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