A number of different investment strategies are available, and one of them is to make use of defensive investments. While it’s difficult to predict market movements, a defensive portfolio will likely have fewer losses than aggressive investments. Defensive investments should be a part of your overall diversification strategy, and they should fit within your timeline and risk tolerance. To determine the optimal defensive investment for you, watch market trends and use a benchmark to measure how your portfolio is doing.
When deciding whether to invest in stocks or ETFs, keep in mind the risks associated with each. Some investors might consider a defensive ETF as a hedge against a steep downturn in the markets. But it’s important to remember that defensive ETFs aren’t a replacement for large-cap stocks. For example, a defensive ETF, such as PFIX, will give you a decent return when conventional stocks are struggling.
Another type of defensive investment is dividend-paying stocks. Dividends are paid in a flat amount per share, so as the stock price falls, so does the dividend yield. If you buy a stock for $30 per share, you’ll get a 6.67% yield. If the stock price goes up, the dividend yield stays the same, meaning you get income from the dividend while also gaining capital. It’s a win-win situation!
Aside from holding cash, some investors consider bonds to be a defensive investment strategy. Although they have lower interest rates than other investments, these funds still give you liquidity to pay bills and invest in other opportunities. Online banks offer the best interest rates and the added security of being insured by the FDIC. Therefore, if you’re looking for a defensive investment, look into a diversified bond portfolio. If your portfolio is weak, investing in bonds could be a great way to make money.
However, if you’re not comfortable with the volatility in the market, you can diversify your portfolio with a defensive exchange-traded fund. You can also invest in individual stocks if you’re feeling adventurous. Just be sure to do your research, as the past performance of an investment product does not guarantee that it will increase in value in the future. As with any other type of investment, it’s important to consider your risk tolerance and financial situation when investing.
Gold is another option for a defensive investment. Gold tends to increase in value during times of market instability. While it’s not a defensive investment for all risks, it can help you protect your money from a falling market. Gold stocks and gold ETFs rise in value during economic uncertainty. Gold is an excellent choice for investors looking for a hedge against inflation. Additionally, gold has zero credit risk and no default risk. With all the risks associated with volatile stocks, gold is an excellent choice for those looking for a low risk, high-return, and stable investment.
Defensive investments can also be beneficial during recessions. They help investors limit their risk by targeting lower-risk investments. During economic turmoil, investors should consider adding some defensive stocks to their portfolios. These stocks can provide some investors with dividend income, which can help them survive a downturn in the stock market. And if you’re nearing retirement, defensive investing can help you preserve your capital. With a defensive investment portfolio, you’ll be able to earn a specified amount of money without taking on excessive risks.