There are 2 Investing Strategies: Income and Growth


Many people confuse investing strategies with investing techniques. The two are intimately connected, because techniques support strategies. But they're definitely not the same.

For instance, when an investor says they use a contrarian investing strategy, they're actually describing a technique.

A strategy is "a plan of action designed to achieve a major or overall objective".

A technique is "a way or method of carrying out a particular task".

In order achieve your goal, you execute a plan or strategy by performing a series of tasks, which require techniques.

In my example, "contrarian" means making investment decisions that do not go along with the consensus or popular opinion. But we still don't know the investor's overall goal. I doubt it's to be contrarian, but that's essentially what they're saying!

Side Note: Don't try to correct them...it won't go over well


The 2 Types of Investing Strategies


In some way, shape, or form, all of the different ways of investing money boil down to just TWO investing strategies. That's right...just 2!

You can either choose to increase the number and size of income streams in your income statement or the number and size of assets in your balance sheet.

Income Investing

  • Buying assets that create additional income entries in a personal income statement
Growth Investing
  • Buying assets that increase in the size of the account balances in a personal balance sheet

I'm not saying that you can't use both strategies; in fact, a good income strategy will create growth in the size of your accounts.

Rather, each strategy has a different focus depending on your MAIN objective. Part of your plan of action is deciding whether you want more earned income, more paper income, or more passive income. The techniques you use will change depending on which income type you choose.

In the end, it pays (literally) to understand each one, and know how and when to use them on the road to achieving your personal financial goals.


Your Overall Objective


As an investor, you want to use today's money to improve tomorrow's financial situation. And you measure your progress using your personal financial statements; specifically your income statement and balance sheet.

Personal budgeting and debt reduction help reduce expenses and liabilities, while investing helps create income and grow assets.

Let's say your goal is "earning" more money (making your earned income stream bigger). You could "invest" in an an advanced degree. In this case, your "investing strategy" is picking the degree that will provide you with job opportunities with the highest salaries when you graduate. By earning a higher salary, you increase the size of your "earned" income stream and made more money.


Your High Level Plan


After you pick your main goal, your "strategy" needs a plan of action designed to make it happen ("Planning" is the second step in my safe investing process).

My research and self-study shows that the best way to start planning is with the 5-Whys (and a How).

  • Who = The Player (You or a Broker)
  • What = The Asset (Type of Investment)
  • Where = The Account (Retirement or Non-Retirement)
  • When = The Timeframe (Days, Months, or Years)
  • Why = The Goal (Income or Growth)
  • How = The Techniques (Trading Rules and Analysis)

As you make decisions, some of your choices in each of these areas will go away. For example, if your strategy uses a retirement account, you won't be able to day trade, which impacts your timeframe and the techniques you can use.

Invest Safely Dollar Sign Callout

Safe Investing Tip:
The strategy itself doesn't make money. The trick is picking the right one, at the right time and using the right methods in the right account. My page on the different aspects of investing money will help you with the trade-offs.


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