Defensive investment strategy

Defensive investment strategy,

Definition of Defensive investment strategy:

  1. Investing a high percentage of resources in safer investments such as debt securities (see Debt Security), and a lower percentage in high yield but risky equities. This strategy follows conservative policies regarding margin and options-trading, and arbitrage. See also balanced investment strategy and defensive investment strategy.

  2. A defensive investment strategy is a conservative method of portfolio allocation and management aimed at minimizing the risk of losing principal. A defensive investment strategy entails regular portfolio rebalancing to maintain one's intended asset allocation; buying high-quality, short-maturity bonds and blue-chip stocks; diversifying across both sectors and countries; placing stop loss orders; and holding cash and cash equivalents in down markets. Such strategies are meant to protect investors against significant losses from major market downturns.

  3. Defensive investment strategies are designed to deliver protection first and modest growth second. With an offensive or aggressive investment strategy, by contrast, an investor tries to take advantage of a rising market by purchasing securities that are outperforming for a given level of risk and volatility. An offensive strategy may also entail options trading and margin trading. Both offensive and defensive investment strategies require active management, so they may have higher investment fees and tax liabilities than a passively managed portfolio. A balanced investment strategy combines elements of both the defensive and offensive strategies.

Meaning of Defensive investment strategy & Defensive investment strategy Definition