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Defensive Investor: Ultimate Guide To Defensive Investment

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by Gavin in Blog
November 19, 2021 2 comments

In this guide, you’ll learn about some of the most important strategies that you can use to become a successful defensive investor.

Contents

In this guide, you’ll have the opportunity to learn about some of the most important strategies that you can use for defensive investments.

You’ll also learn why it might be a good idea to look for defensive investments when building your investment portfolio.

It can be incredibly important to learn defensive investment strategies to manage your risk and control your financial future successfully.

We’ll cover everything that you need to know about defensive investment strategies so that you can learn all of the important tips and tricks to be a successful defensive investor.

Defensive investing is one of the best low-risk investment strategies you can use when building your portfolio.

Defensive investing is a perfect type of investment strategy for someone willing to sacrifice some of the highest potential investment returns in exchange for lower volatility and risk.

In this guide, you’ll learn about some of the best defensive investments that you can make.

You’ll also have the opportunity to learn and integrate defensive investments into your financial portfolio so that you can invest your money with minimal risk.

3 Reasons Why Defensive Investing Can Be Useful

One of the main reasons you might want to utilize a defensive investment strategy is to avoid unnecessary risks when investing your money.

Investing can present a lot of risk and volatility, which can be extremely uncomfortable for some people.

The second reason is that many of the best defensive investments have proven to be reliable over long periods of time.

If you plan on investing a substantial amount of money, then there’s a really good chance that you’re probably going to want to utilize a defensive investment strategy to craft your investment portfolio.

defensive stocks

The final reason you might be interested in defensive investing tactics is to provide a stable income for you.

If you plan to invest enough money to generate an annual income, defensive investments can be a great way to grow your money in a low-volatility investment environment.

What Are Some Examples Of Defensive Investments?

There are many different defensive investment opportunities that you can take advantage of as a defensive investor.

These examples include stocks, bonds, precious metals, mutual funds, ETFs, and even real estate.

The term ‘defensive stock’ describes a company’s stock that is regarded as extremely safe.

Coca Cola (KO), General Mills (GIS), Amazon (AMZN), and Apple (AAPL) are all considered to be among the safest defensive stocks in the industry.

These stocks have earned the right to be listed in the ‘defensive stock’ category because they can perform well even when the market conditions are not ideal.

Investors love placing their money into these companies because they are virtually guaranteed to get a return after long periods of time.

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If you’re looking for a few defensive stocks to invest in, the four that we listed above are a great place to start.

The truth is that there are hundreds of excellent defensive stocks that you can invest in right now in 2021.

Defensive Investment Strategy For Bonds

Short-term bond investments can be great for defensive investors because the highest-quality bonds are usually very reliable.

As a defensive investor, you should only invest in bonds with an excellent credit rating from the bond issuer.

You’re generally looking for high-quality short-term bonds that have a safe credit history.

These types of bonds include the U.S. Savings Bonds and U.S. Treasury Bonds.

In some cases, Investment Grade Corporate Bonds can also be a great investment for defensive investors to consider in their portfolio.

Diversity Is A Key To A Defensive Investment

One of the most critical factors that any defensive investor should consider is to have a diverse portfolio with several high-quality defensive investments at any given time.

Having all of your eggs in one basket can be risky, but diversify portfolios into defensive stocks and bonds can provide you with the financial security you are looking for.

You’ll want to designate a specific percentage of your portfolio into each form of defensive investment that you are willing to invest in.

For example, 50% of your portfolio may be designated to defensive stocks, while 30% is invested in defensive bonds.

The remaining 20% may be spread across investments in gold and cash assets.

This allocation is considered a reasonably diverse portfolio for defensive investing because it doesn’t rely too much on any particular type of investment or industry.

Final Thoughts

Defensive investing is an excellent opportunity to grow your money without taking on too much risk.

As you have learned throughout this guide, there are many different ways to approach defensive investing.

Some investors like to hold a diverse collection of defensive stocks, while others may be interested in having precious metals, bonds, and stocks all at once.

You will have to make the best investment decision for your scenario.

It’s important to understand the many different types of defensive investments available to you before you even get started.

Trade safe!

Disclaimer: The information above is for educational purposes only and should not be treated as investment advice. The strategy presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in this strategy should do their own research and seek advice from a licensed financial adviser.

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2 Comments
  1. Iyos says:

    Thanks for your posting! I was wondering, what is a key indicator for identifying defensive stocks?

    1. Gavin says:

      Low bet, low correlation to the economic cycle. E.g. Utilities, consumer staples.

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Options Trading 101 - The Ultimate Beginners Guide To Options

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