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After establishing an appropriate valuation model for each possible outcome and determining how probable each is likely to be, a classic decision-analysis framework can be used to evaluate the risks and returns inherent in alternative strategies. Such an analysis is often the key to making the case for strategic change. In level 2 situations, it is important not only to identify the different possible future outcomes but also to think through the likely paths the industry might take to reach those alternative futures.

Or will change occur in a more evolutionary fashion, as often happens after a resolution of competing technology standards? This is vital information because it determines which market signals or trigger variables should be monitored closely. At one level, the analysis in level 3 is very similar to that in level 2. A set of scenarios needs to be identified that describes alternative future outcomes, and analysis should focus on the trigger events signaling that the market is moving toward one or another scenario.

Developing a meaningful set of scenarios, however, is less straightforward in level 3. Scenarios that describe the extreme points in the range of possible outcomes are often relatively easy to develop, but these rarely provide much concrete guidance for current strategic decisions.

Since there are no other natural discrete scenarios in level 3, deciding which possible outcomes should be fully developed into alternative scenarios is a real art. But there are a few general rules. First, develop only a limited number of alternative scenarios—the complexity of juggling more than four or five tends to hinder decision making.

Third, develop a set of scenarios that collectively account for the probable range of future outcomes and not necessarily the entire possible range. Because it is impossible in level 3 to define a complete list of scenarios and related probabilities, it is impossible to calculate the expected value of different strategies. However, establishing the range of scenarios should allow managers to determine how robust their strategy is, identify likely winners and losers, and determine roughly the risk of following status quo strategies.

Situation analysis at level 4 is even more qualitative. Instead, managers need to catalog systematically what they know and what is possible to know. Even if it is impossible to develop a meaningful set of probable, or even possible, outcomes in level 4 situations, managers can gain valuable strategic perspective. Usually, they can identify at least a subset of the variables that will determine how the market will evolve over time—for example, customer penetration rates or technology performance attributes.

At level 4, it is critical to avoid the urge to throw up your hands and act purely on gut instinct. Managers can also identify patterns indicating possible ways the market may evolve by studying how analogous markets developed in other level 4 situations, determining the key attributes of the winners and losers in those situations and identifying the strategies they employed. Finally, although it will be impossible to quantify the risks and returns of different strategies, managers should be able to identify what information they would have to believe about the future to justify the investments they are considering.

Early market indicators and analogies from similar markets will help sort out whether such beliefs are realistic or not. Uncertainty demands a more flexible approach to situation analysis. The old one-size-fits-all approach is simply inadequate. Over time, companies in most industries will face strategy problems that have varying levels of residual uncertainty, and it is vitally important that the strategic analysis be tailored to the level of uncertainty. The old one-size-fits-all analytic approach to evaluating strategy options is simply inadequate.

Postures and Moves Before we can talk about the dynamics of formulating strategy at each level of uncertainty, we need to introduce a basic vocabulary for talking about strategy. Second, there are three types of moves in the portfolio of actions that can be used to implement that strategy: big bets, options, and no-regrets moves. Strategic Posture. Any good strategy requires a choice about strategic posture. Fundamentally, posture defines the intent of a strategy relative to the current and future state of an industry.

Shapers aim to drive their industries toward a new structure of their own devising. Their strategies are about creating new opportunities in a market—either by shaking up relatively stable level 1 industries or by trying to control the direction of the market in industries with higher levels of uncertainty.

Kodak, for example, through its investment in digital photography, is pursuing a shaping strategy in an effort to maintain its leadership position, as a new technology supersedes the one currently generating most of its earnings. Hewlett-Packard also seeks to be a shaper in this market, but it is pursuing a radically different model in which high-quality, low-cost photo printers shift photo processing from stores to the home.

The Three Strategic Postures In contrast, adapters take the current industry structure and its future evolution as givens, and they react to the opportunities the market offers. In environments with little uncertainty, adapters choose a strategic positioning—that is, where and how to compete—in the current industry. At higher levels of uncertainty, their strategies are predicated on the ability to recognize and respond quickly to market developments.

In the highly volatile telecommunications-service industry, for example, service resellers are adapters. They buy and resell the latest products and services offered by the major telecom providers, relying on pricing and effective execution rather than on product innovation as their source of competitive advantage. The third strategic posture, reserving the right to play, is a special form of adapting. This posture is relevant only in levels 2 through 4; it involves making incremental investments today that put a company in a privileged position, through either superior information, cost structures, or relationships between customers and suppliers.

That allows the company to wait until the environment becomes less uncertain before formulating a strategy. Many pharmaceutical companies are reserving the right to play in the market for gene therapy applications by acquiring or allying with small biotech firms that have relevant expertise. A Portfolio of Actions. A posture is not a complete strategy. It clarifies strategic intent but not the actions required to fulfill that intent. Three types of moves are especially relevant to implementing strategy under conditions of uncertainty: big bets, options, and no-regrets moves.

Big bets are large commitments, such as major capital investments or acquisitions, that will result in large payoffs in some scenarios and large losses in others. Not surprisingly, shaping strategies usually involve big bets, whereas adapting and reserving the right to play do not. Options are designed to secure the big payoffs of the best-case scenarios while minimizing losses in the worst-case scenarios.

This asymmetric payoff structure makes them resemble financial options. Most options involve making modest initial investments that will allow companies to ramp up or scale back the investment later as the market evolves. Classic examples include conducting pilot trials before the full-scale introduction of a new product, entering into limited joint ventures for distribution to minimize the risk of breaking into new markets, and licensing an alternative technology in case it proves to be superior to a current technology.

Those reserving the right to play rely heavily on options, but shapers use them as well, either to shape an emerging but uncertain market as an early mover or to hedge their big bets. Finally, no-regrets moves are just that—moves that will pay off no matter what happens. Managers often focus on obvious no-regrets moves like initiatives aimed at reducing costs, gather-ing competitive intelligence, or building skills.

However, even in highly uncertain environments, strategic decisions like investing in capacity and entering certain markets can be no-regrets moves. Whether or not they put a name to them, most managers understand intuitively that no-regrets moves are an essential element of any strategy. The choice of a strategic posture and an accompanying portfolio of actions sounds straightforward. But in practice, these decisions are highly dependent on the level of uncertainty facing a given business.

Thus the four-level framework can help clarify the practical implications implicit in any choice of strategic posture and actions. The discussion that follows will demonstrate the different stra-tegic challenges that each level of uncertainty poses and how the portfolio of actions may be applied.

In predictable business environments, most companies are adapters. When the underlying analysis is sound, such strategies are by definition made up of a series of no-regrets moves. Adapter strategies in level 1 situations are not necessarily incremental or boring. In both cases, managers were able to identify unexploited opportunities in relatively low-uncertainty environments within the existing market structure. The best level 1 adapters create value through innovations in their products or services or through improvements in their business systems without otherwise fundamentally changing the industry.

It is also possible to be a shaper in level 1 situations, but that is risky and rare, since level 1 shapers increase the amount of residual uncertainty in an otherwise predictable market—for themselves and their competitors—in an attempt to fundamentally alter long-standing industry structures and conduct.

Smith commissioned detailed consulting reports that confirmed the feasibility of his business concept, only a broad range of potential demand for overnight services could be identified at the time. Over time, the industry returned to level 1 stability, but with a fundamentally new structure. What portfolio of actions did it take to realize that strategy? Like most shaper strategies, even in level 1 situations, this one required some big bets.

That said, it often makes sense to build options into a shaper strategy to hedge against bad bets. Such moves would have limited the amount of capital he would have needed to sink into his new strategy and facilitated a graceful exit had his concept failed. Thus Smith stuck mainly to big bets in implementing his strategy, which drove him to the brink of bankruptcy in his first two years of operation but ultimately reshaped an entire industry.

If shapers in level 1 try to raise uncertainty, in levels 2 through 4 they try to lower uncertainty and create order out of chaos. In level 2, a shaping strategy is designed to increase the probability that a favored industry scenario will occur.

Consequently, shapers in such cases might commit their companies to building new capacity far in advance of an upturn in demand to preempt the competition, or they might consolidate the industry through mergers and acquisitions. A few years ago, one could identify a discrete set of possible ways in which transactions would be conducted between networked computers. Either proprietary networks such as MSN would become the standard, or open networks like the Internet would prevail.

Uncertainty in this situation was thus at level 2, even though other related strategy issues—such as determining the level of consumer demand for networked applications—were level 3 problems. Microsoft could reasonably expect to shape the way markets for electronic commerce evolved if it created the proprietary MSN network. It would, in effect, be building a commerce hub that would link both suppliers and consumers through the MSN gateway. The strategy was a big bet: the development costs were significant and, more important, involved an enormously high level of industry exposure and attention.

In effect, for Microsoft, it constituted a big credibility bet. But even the best shapers must be prepared to adapt. In the battle between proprietary and open networks, certain trigger variables—growth in the number of Internet and MSN subscribers, for example, or the activity profiles of early MSN subscribers—could provide valuable insight into how the market was evolving.

When it became clear that open networks would prevail, Microsoft refocused the MSN concept around the Internet. Shaping strategies can fail, so the best companies supplement their shaping bets with options that allow them to change course quickly if necessary. Microsoft was able to do just that because it remained flexible by being willing to cut its losses, by building a cadre of engineers who had a wide range of general-programming and product-development skills, and by closely monitoring key trigger variables.

In uncertain environments, it is a mistake to let strategies run on autopilot, remaining content to update them only through standard year-end strategy reviews. Shaping strategies can fail, so the best companies supplement their shaping bets with options that let them change course quickly.

Because trigger variables are often relatively simple to monitor in level 2, it can be easy to adapt or reserve the right to play. For instance, companies that generate electricity—and others whose business depends on energy-intensive production processes—often face level 2 uncertainty in determining the relative cost of different fuel alternatives.

Discrete scenarios can often be identified—for example, either natural gas or oil will be the low-cost fuel. Many companies thus choose an adapter strategy when building new plants: they construct flexible manufacturing processes that can switch easily between different fuels. Chemical companies often choose to reserve the right to play when facing level 2 uncertainty in predicting the performance of a new technology. If the technology performs well, companies will have to employ it to remain competitive in the market.

But if it does not fulfill its promise, incumbents can compete effectively with existing technologies. Most companies are reluctant to bet several hundred million dollars on building new capacity and retrofitting old plants around a new technology until it is proven. Thus many will purchase options to license the new technology within a specified time frame or begin retrofitting a proportion of existing capacity around the new technology. In either case, small, up-front commitments give the companies privileged positions, but not obligations, to ramp up or discontinue development of the new technology as its performance attributes become clearer over time.

Shaping takes a different form in level 3. If at level 2, shap-ers are trying to make a discrete outcome occur, at level 3, they are trying to move the market in a general direction because they can identify only a range of possible outcomes. Consider the battle over standards for electronic cash transactions, currently a level 3 problem since one can define a range of potential products and services that fall between purely paper-based and purely electronic cash transactions, but it is unclear today whether there are any natural discrete scenarios within that range.

Mondex International, a consortium of financial services providers and technol-ogy companies, is attempting to shape the future by establishing what it hopes will become universal electronic-cash standards. Its shaping posture is backed by big-bet investments in product development, infrastructure, and pilot experiments to speed customer acceptance.

In contrast, regional banks are mainly choosing adapter strategies. An adapter posture at uncertainty levels 3 or 4 is often achieved primarily through investments in organizational capabilities designed to keep options open. Because they must make and implement strategy choices in real time, adapters need quick access to the best market information and the most flexible organizational structures.

In addition, many regional banks are making small investments in industry consortia as another way to monitor events. Reserving the right to play is a common posture in level 3. The decision hinged on level 3 uncertainties such as demand for interactive TV service. However, making incremental investments in broadband-network trials could provide useful information, and it would put the company in a privileged position to expand the business in the future should that prove attractive.

By restructuring the broadband-investment decision from a big bet to a series of options, the company reserved the right to play in a potentially lucrative market without having to bet the farm or risk being preempted by a competitor.

Paradoxically, even though level 4 situations contain the greatest uncertainty, they may offer higher returns and involve lower risks for companies seeking to shape the market than situations in either level 2 or 3. Recall that level 4 situations are transitional by nature, often occurring after a major technologi-cal, macroeconomic, or legislative shock. This is truly a level 4 strategy problem at this point. Potential products are undefined, as are the players, the level of customer demand, and the technology standards, among other factors.

By leveraging incentives like a ten-year exemption from the tax on profits, the MSC has received commitments from more than 40 Malaysian and foreign companies so far, including such powerhouses as Intel, Microsoft, Nippon Telegraph and Telephone, Oracle, and Sun Microsystems. All that is required is the credibility to coordinate the strategies of different players around the preferred outcome.

Reserving the right to play is common, but potentially dangerous, in level 4 situations. Oil companies believed they were reserving the right to compete in China by buying options to establish various beachheads there some 20 years ago. However, in such level 4 situations, it is extremely difficult to determine whether incremental investments are truly reserving the right to play or simply the right to lose. A few general rules apply. First, look for a high degree of leverage.

If the choice of beachhead in China comes down to maintaining a small, but expensive, local operation or developing a limited joint venture with a local distributor, all else being equal, go for the low-cost option. Higher-cost options must be justified with explicit arguments for why they would put the company in a better position to ramp up over time. Options should be rigorously reevaluated whenever important uncertainties are clarified—at least every six months.

Remember, level 4 situations are transitional, and most will quickly move toward levels 3 and 2. The difficulty of managing options in level 4 situations often drives players toward adapter postures. As in level 3, an adapter posture in level 4 is frequently implemented by making investments in organizational capabilities.

Most potential players in the multimedia industry are adopting that posture today but will soon be making bigger bets as the industry moves into level 3 and 2 uncertainty over time. A New Approach to Uncertainty At the heart of the traditional approach to strategy lies the assumption that by applying a set of powerful analytic tools, executives can predict the future of any business accurately enough to allow them to choose a clear strategic direction.

In relatively stable businesses, that approach continues to work well. But it tends to break down when the environment is so uncertain that no amount of good analysis will allow them to predict the future. Levels of uncertainty regularly confronting managers today are so high that they need a new way to think about strategy. It offers a discipline for thinking rigorously and systematically about uncertainty. On one plane, it is a guide to judging which analytic tools can help in making decisions at various levels of uncertainty and which cannot.

On a broader plane, our framework is a way to tackle the most challenging decisions that executives have to make, offering a more complete and sophisticated understanding of the uncertainty they face and its implications for strategy. The authors would like to thank their STI colleagues for their significant contributions to this article. For instance, you look at the money in your checking account, your savings account, and your investment accounts differently.

This is the tendency to make financial decisions based on the outcomes instead of the processes that brought about the outcomes. Whether you have a financial degree or not, many of you believe you can time the market or play the market better than the experts. Honestly, I have a hard time working with people who have an overconfidence bias.

This is the tendency to classify financial events, decisions, and outcomes based on past experiences. Again, think of the events from to The stock market went crazy, and now, many people are sitting on their cash. Much like the overconfidence bias, the self-attribution bias is the tendency to attribute successful financial outcomes to your own talents, skills, and actions and to attribute unfavorable financial outcomes to external factors. We like to take credit for the good, but we like to pass the blame for the bad.

I have self-control. However, money is emotional to me. Therefore, I sometimes make irrational decisions when it comes to my own money. I have a tendency to sell low or to try to fix something. This is the preference to keep your financial status as-is in order to avoid a change of any kind.

Typically, investors want to be middle of the road. This is the tendency to make financial investments based on their past performance, thinking that past performance indicates future performance. In a sense, you can put up financial guard rails.

In order to take control of your cash flow, risk management, investments, and distributions, you must be able to act and react rationally rather than irrationally. Building wealth is not a sprint. Yet, the fact is that money comes easy, and money goes easy. In order to build a long-term, sustainable positive net worth, you have to run a marathon, not a sprint.

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Someone who has insane mood swings. Well, a volatile stock market reacts in a similar way. Volatility refers to the up and down fluctuations in the market. The more frequently the market swings up and down, the more volatile it is said to be. Investing strategies Asset allocation.

Asset allocation attempts to balance risk and reward by adjusting the percentage of assets you have invested across different assets stocks, bonds, cash. Buy and hold investing. This is an investment strategy where an investor will buy stocks and then hold them for a long period of time ignoring the ups and downs of the market.

Dollar-cost averaging. This is an investment strategy where you invest the same amount of money at regular intervals for an extended period of time. Also, dollar-cost averaging can be better for people emotionally. It can be super stressful to invest a huge amount of money — but breaking it up over time it might make it feel more manageable and less scary.

Lump-sum investing. Lump-sum investing is where you take a lump sum of money and invest it all at once. Micro investing. This is an investing method that allows you to invest very small amounts of money. Like spare change small. It makes investing super easy.

Different ways to invest Stock broker. This is someone who acts as an intermediary between buyers and sellers of securities stocks, bonds, etc. Full-service brokerage. This is an institution or firm that assumes the role of intermediary between buyers and sellers of securities.

They charge a commission for their services which include financial consulting, money management, and estate planning. Discount brokerage. This is an online trading platform that charges lower fees than a traditional brokerage. They also offer a ton of great content and guidance for new investors to check out.

TD Ameritrade is another great option. They offer zero commissions when trading stocks and ETFs, as well as no minimum deposits. A robo-advisor provides investment advice and management using a digital platform. With a robo-advisor, there is little human to human interaction, though if you have a question you can still speak with a real-live person, not a robot. Rather than having a human investment advisor to do your investing, a robo-advisor uses specialized software and complex algorithms to invest on your behalf.

Wealthfront is a popular US robo-advisor that offers a number of different investment services from retirement investing, and education investing, to investing for any other reason. They offer low fees and can work with you to plan for the future you really want.

Types of investments Bond. A bond is essentially a loan given to a company or government by investors. Companies and governments borrow money from investors and then pay interest to the investors. Often referred to as equity or shares, a stock is a type of investment that represents partial ownership in a company. Blue-chip investment. You can think of Blue-chip investments as posh investments.

Blue-chip investments refer to the companies that have been around forever, have a long history of good earnings, and a solid balance sheet. A commodity is a raw material that can be bought and sold. Examples of commodities include agricultural wheat , metals gold, silver , and energy oil.

In the simplest terms, a cryptocurrency is a digital currency that uses cryptography to provide security. Cryptocurrencies are like any other form of currency in that you can use it to make purchases. Robinhood Crypto is specifically targeted to investors who are interested in buying and selling cryptocurrencies. All investments involve risk and the past performance of a security, or financial product does not guarantee future results or returns. ETF stands for exchange-traded fund.

An ETF allows you to purchase a large number of securities — stocks, bonds, or commodities — all at once. You can think of an ETF like a grocery basket but instead of filling your basket with eggs and milk, you fill it with stocks or bonds. And, instead of purchasing each item individually, you purchase the entire basket all in one go! Hedge fund. When you hear the term hedge fund, do you think of rich people? A hedge fund is a pool of money used by investors and institutions who can absorb a loss from a risky trade.

Hedge funds are not as regulated as other funds like a mutual fund and they also tend to have higher fees. Hedge funds and rich people are often thought of together because it typically requires a large minimum investment to get into a hedge fund. Index fund. An index fund is a hypothetical portfolio that represents a segment of the financial market. An index fund can be an index mutual fund or an index exchange-traded fund. S publicly traded companies.

There are all kinds of index funds, ones for metals, ones for the tech sector, ones for bonds, you can find an index fund for almost anything. Mutual fund. Tap or select Disclaimer. We are constantly evaluating our customer needs and expanding real-time coverage as required. The index page will open. Scroll to the right to see movers, constituents and other information about the index.

Stock prices are displayed along with the trading time information and charts on the stock details page. See which stock exchange data is available in the app Swipe left from the right edge of the screen and tap Settings. If you're using a mouse, point to the lower-right corner of the screen, move the mouse pointer up, and then select Settings.

Select About, and then tap or select Product Details to see a list of supported stock exchanges. FAQ How do I research my favorite indices? Option 2 Swipe down from the top of the screen, or right-click with your mouse. In World Markets, you can see other international market indices.

Tap or select an index to see the Index Details page. Option 3 You can also find major stock markets through the search bar. Start typing in the app to display the search bar and select a search term. Tap the index that you want to view.

You can also search for additional markets by using the Search icon at the bottom of the screen. How do I pin my Watchlist to the Start screen? You can add the top five stocks in your Watchlist to the Start screen to see live updates about them. Swipe down from the top of the screen, or right-click with your mouse.

Tap or select the Watchlist button. Swipe down from the top of the screen, or right-click with your mouse, then tap or select Pin to Start. Enter a name or accept the default name, Watchlist — top 5, for the tile that will be placed on your Start screen. The top five items in your Watchlist will be pinned as a tile at the end of your Start screen and you can view the updates for these stocks by selecting the tile.

You can also change the order of the items in the Watchlist that are displayed in the tile. How do I see financial news from other sources? In the Windows Phone app just tap at the bottom of any screen to find additional stories or sources.

For the Windows app: Swipe down from the top of the screen with your finger or right-click with your mouse to open the navigation bar. Under Featured you'll find a selection of featured sources of financial news. Tap or select your choice to go straight to content from that source. If you would like to browse a large list of financial sites around the web, tap or select Best of Web in the navigation bar.

How do I see the top gainers and losers for the day? For the Windows app: Swipe down from the top of the screen. Then tap or select the arrow next to the Market button. From the available subcategories, tap or select Market Movers. For the Windows Phone app: In the phone app, swipe to the more section of the app and tap the World Markets tile. Tap the tile for any market, then swipe to the movers section. On the Today page, go to the My Money cluster next to the Watchlist.

Choose your online broker by slecting the corresponding tile to go to its sign-in screen. Enter your sign-in info and tap or select the Done button at the bottom. If authentication happens successfully, you'll see the Select Accounts screen, where you can select accounts to add to My Money. By default, all your accounts will be selected.

If you're adding an account for the first time, you'll be asked to create a one-time 4-digit PIN to help secure your personal data on the device. Create your PIN, then tap or select the Done button at the bottom. The brokerage account s will be added to the My Money cluster. You can tap or select the tile to view details including account balances, positions, transactions, etc.

For the Windows app: Tap or select any brokerage tile from the My Money cluster on the Today page to go to its details page. Swipe down from the top of the screen or up from the bottom to bring up a menu. If you're using a mouse, right-click anywhere on the page to see the menu.

On the bottom menu, tap or select Pin to Start. You can choose to edit the name that appears on the pinned tile. Tap or select Pin to Start. You've successfully pinned your favorite broker to Start. Tap or select that tile for easy access to your favorite broker's details page. How secure is the My Money feature? We're committed to help keep your data safe and secure. All communication with your online brokerage happens over advanced Secure Socket Layers SSL to help assure maximum safety.

A 4-digit PIN set by you helps keep your account data secure. The PIN helps to encrypt your data, maintain your privacy, and it can also help protect your data in case your device is stolen. The PIN is applicable to this device only. We don't store your personal data on our servers. The permission level on your data is read-only and no one can trade, withdraw, or move your money.

What is the exchange rate of my local currency? In the Windows Phone app, swipe to the more section of the app and tap the Currencies tile. From the available subcategories, tap or select Currencies. A currency converter tool is also available on this page. What information will I be able to view for my brokerage account? On the details page, you'll see the following features: The left-hand side panel gives an account summary of all accounts that you have added from a particular broker.

Portfolio mix gives an overall composition of your portfolio and how it is divided among the securities you own. The Movers section shows the top gainers and losers in your portfolio to help you gauge the movement of your securities.