Think how it feels when you buy a particular stock and find that it’s price keep on going up regardless of market variations.
Who doesn’t want their stock to keep moving upward? Anyway, when you look for the price you may find to be a greater and better profit margin.
This strategy is for those people who want to play safely in the market. This involves playing with those stocks which never show underperformed results whatever may the market scenario.
These stocks may get low temporarily but recover soon as it deals with basic functionalities of life like a pharmaceutical company, supermarkets etc.
Defensive investment is a long term game and can be used to with value investing and dividend investing strategy, where one finds defensive stocks which are undervalued and good with dividends.
The defensive Investment strategy is a method of portfolio management and helps investors to allocate blue chip stocks in their portfolio. Investors with this strategy can do rebalancing of their portfolio with proper asset class allocation.
Asset allocation is done with minimum risk by selecting blue chip stocks with short-term Govt bonds and gold. This diversification and type of diversified stocks with strong brand name and cash flow protects the investor from losing their investment in an economic crash.
Here investors invest in defensive stocks where they need to perceive macroeconomic risk. Defensive stocks refer to stocks that are not hit hard during economic crises and withstand weak economy.
Usually, defensive stocks outperform than other stocks in a generally weak economy like consumables which include products like food and pharmaceutical companies whose sales do not effect during the weak economy time as they are basic needs and no one will cut down the consumption of such products.
Think of a time where recessions and crisis for job start prevailing in an economy, whatever may be the case people will not stop eating food, taking medicines, taking bath, brush their teeth etc.
So a company with such products do not deviate from growth as their products fulfil the basic needs and their sale never go down.
Are you the right person? Who should use this?
As an investor, if long term is your choice then you can go with this strategy. This eliminates risk and guides you to build a proper portfolio.
If you want to remain fearless and risk-free this strategy will help you to pick some fine blue chip stock and earn without any giving much of your time.
- Helps to build and manage a defensive portfolio that will survive during economic crises
- Good for long term investor
- Low risk associated with this strategy
- Can be associated with value and dividend investment strategies
What you need to do here is select the type of stock and invest which you find will not fall, comes under the blue chip and have a strong history. This is best for beginners as you will feel secured and help you boost confidence and understand the market better.
Whichever strategy you follow it is advised to have some blue chip stock in your portfolio. It’s always better to have something less than to lose everything.