The Defensive Investor

The defensive investor is also known as the passive investor. Anyone who doesn’t want to actively manage their funds. This accounts for pretty well everyone. You may certainly have a defensive overall strategy with a side of risk. Humans by nature enjoy pushing the envelope; set aside some cash for speculation. The high risk, high reward fund.  Stay disciplined in this practice.

The previous article posted Easy, Smart & Safe is just one method of the defensive investor. Leveraging cost averaging, and owning a massive amount of the market.

Let’s look at the beginning of another method.

Obviously, there’s mutual funds which are completely managed by someone else. Or also electronic exchange traded funds too. However, let’s look at some principles of picking a portfolio of common stocks for the defensive investor.

 

  • Don’t become complacent & emotionally attach. You must stay in the loop with the companies you invest; look for reasons they could fail. It’s easy to put too much faith in stocks you are emotionally invested in.
  • Look for large companies. Market cap over $5 Billion.
  • Relatively unpopular.  Avoid the obvious big names that you’ll likely be over paying for. Search for fundamentally sound brands with great management
  • 10 year dividends. Seek companies that have paid dividends for close to 10 years straight.
  • Revenue & Bottom line growth. 

This is the basic shell of the defensive investor. Also be aware that there are hundreds of points you could write here. These are just a few of the most important I feel. I will put forth more information on each section & elaborate in future posts. Hope these little tips help.

Thanks,

Chris

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