Matching Strategy

Used by individual investors and firms alike, the matching strategy is one in which you invest in investments with payouts that “match” up with your liabilities. Perfect matching isn’t always possible, but getting your investments and debts to equal each other (or get pretty close) still counts as a matching strategy.

In order to “match,” the payouts of the investment have to be predictable, as do your liabilities (what you owe). That means investments like stocks can’t be used as a good tool for a matching strategy. Rather, fixed payout assets with known maturity dates are used for matching investments with existing liabilities.

For an individual investor, diversification is probably more important than matching, at least if you want the potential for high expected returns. Using a matching strategy is great for hedging to mitigate risk though, so it makes it a smart option for firms (or low-risk individuals) looking for some financial stability.