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A couple of decades ago, when the cold war was still around, I read about about Russian military planning. They used a scheme of three hierarchical plans.
The Strategic Plan: this plan sets out the goals, usually long-term goals. This plan is political and given to the military to accomplish.
The Operational Plan: this plan defines the allocation of resources. Basic ideas are objectives, timing, and amounts of resources. Generals do this planning.
The Tactical Plan: this plan implements the operational plan; it is basically the maneuvers using the resources provided by the operational plan to achieve the operational plan objectives in a timely manner. In general there are a series of these short-term plans to satisfy the Operational Plan requirements.
In terms of financial portfolios:
A Strategic Plan is devised by the portfolio owner, possibly with the help of an advisor. Typical goals might be retirement income, fund a college education, buy a house, etc. Also some goals may overlap parts of the Operational Plan, e.g. drawdown 4% of portfolio annually.
An Operational Plan is devised by the portfolio owner, possibly with the help of an advisor. For example an asset allocation scheme would indicate which kinds and quantities of assets are to be in a portfolio. The frequency of rebalancing would address the timing issue. Whether and how to use Dollar Cost Averaging is another timing issue
A Tactical Plan is the responsibility of the portfolio owner. This involves selecting a broker or mutual fund company to execute the trades. Then there are trading decisions such as using mutual funds or ETFs (may also be part of the Operational Plan). If using ETFs there are decisions about whether to use market orders, or limit orders, or stop-loss orders, etc.
Comments
The Strategic Plan: this plan sets out the goals, usually long-term goals. This plan is political and given to the military to accomplish.
The Operational Plan: this plan defines the allocation of resources. Basic ideas are objectives, timing, and amounts of resources. Generals do this planning.
The Tactical Plan: this plan implements the operational plan; it is basically the maneuvers using the resources provided by the operational plan to achieve the operational plan objectives in a timely manner. In general there are a series of these short-term plans to satisfy the Operational Plan requirements.
In terms of financial portfolios:
A Strategic Plan is devised by the portfolio owner, possibly with the help of an advisor. Typical goals might be retirement income, fund a college education, buy a house, etc. Also some goals may overlap parts of the Operational Plan, e.g. drawdown 4% of portfolio annually.
An Operational Plan is devised by the portfolio owner, possibly with the help of an advisor. For example an asset allocation scheme would indicate which kinds and quantities of assets are to be in a portfolio. The frequency of rebalancing would address the timing issue. Whether and how to use Dollar Cost Averaging is another timing issue
A Tactical Plan is the responsibility of the portfolio owner. This involves selecting a broker or mutual fund company to execute the trades. Then there are trading decisions such as using mutual funds or ETFs (may also be part of the Operational Plan). If using ETFs there are decisions about whether to use market orders, or limit orders, or stop-loss orders, etc.