Know Your Strategy and Stick to It
Investment strategies can vary in the details, but in general they will have at least the following elements:
Time Horizon
Time Horizon is an essential derivative from the purpose of the pool of capital to which it applies. For Living Capital, either a very short- (cash) or a medium-term (bonds, for specific outlays with defined deadlines) horizon is appropriate. For Permanent Capital, a very long-term horizon (ideally, in perpetuity) is ideal. For Fun Capital, anything goes (but here too one needs to define at least a theoretical target).
Target Risk
Determining a Target Risk level involves several elements, some of which are tied to behavioral characteristics of the specific investor. I have purposefully left out a "target return" precisely for this reason: some investors will understand the risk implied in a strategy with a given horizon, but may not have the psychological capacity to sustain it, no matter what the prospective return.
Investment Process
The Investment Process consists of the methodology used to take investment decisions, and of the vehicles employed in implementing those decisions. A simple, clear-cut and parsimonious approach is the key to obtaining results which are close to the target markets or indices. Active management should be employed when an exceptional opportunity is found, not as a rule.