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A defensive investment strategy is designed to protect a portfolio against losing money during the decline of the market. This approach gives priority to stability over high efficiency and as a result it can be expected that the income lags behind during rising markets. A defensive strategy can help you maintain capital and still offer modest growth. A defensive portfolio will probably be tilted to assets with a lower risk, such as bonds of investment quality or Dividend-paying shares. In the long term, a defensive strategy will generally yield a lower return than a more aggressive approach. Investors who are conservative, retire or collect funds for goals in the short and interim term can choose to deal with a defensive investment strategy.
If you want to develop a defensive investment strategy for your portfolio, a financial adviser Can work with you in selecting investments and managing risks.
Defensive investing describes one investment strategy Designed to minimize risks and to protect capital during periods of market volatility or economic decline. Otherwise Aggressive investment approacheswho are aimed at a high efficiency due to riskier assets, defends defensive investing on stability and preservation of wealth. This approach is often preferred by persons approaching with retirement, have a lower risk tolerance or may need liquidity at the almost interim duration.
Defensive investments usually include assets that are less influenced by market fluctuations. This often include sectors such as utilities, health care and consumer tapes, which offer essential goods and services that people still need, regardless of the economic climate. Stocks of companies within these sectors are known for steady income and consistent dividends, making them a cornerstone for defensive investors. In addition, defensive strategies often contain bonds that offer a predictable income flow and are generally considered safer than shares.
Having a defensive strategy does not guarantee that an investor will never lose money. However, it can be particularly favorable during bear markets and periods of economic uncertainty. Defensive investing can also be useful when an investor is looking for the profit he has already made.
Moreover, defensive investing can be a good strategy for people with financial goals in the short to medium term, because it reduces the risk of selling volatile assets during a market for the market for planned expenses for the fund. That said, even aggressive investors can absorb defensive elements in times of increased market instability to cover themselves against potential losses.