Defensive Investment Strategy

AAA

DEFINITION of 'Defensive Investment Strategy'

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.

INVESTOPEDIA EXPLAINS 'Defensive Investment Strategy'

With an offensive or aggressive investment strategy, in contrast, an investor tries to take advantage of a rising market by purchasing securities that are outperforming the market 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.

RELATED TERMS
  1. Aggressive Investment Strategy

    A portfolio management strategy that attempts to maximize returns ...
  2. Balanced Investment Strategy

    A portfolio allocation and management method aimed at balancing ...
  3. All Weather Fund

    A mutual fund that tends to perform reasonably well during both ...
  4. Cash And Cash Equivalents - CCE

    An item on the balance sheet that reports the value of a company's ...
  5. Defensive Buy

    Securities or investments that are perceived as being lower risk ...
  6. Offensive Competitive Strategy

    A type of corporate strategy that consists of actively trying ...
Related Articles
  1. The Ups And Downs Of Investing In Cyclical ...
    Investing

    The Ups And Downs Of Investing In Cyclical ...

  2. Where's The Market Headed Now?
    Fundamental Analysis

    Where's The Market Headed Now?

  3. 5 Popular Portfolio Types
    Trading Strategies

    5 Popular Portfolio Types

  4. Tips For Recession-Proofing Your Portfolio
    Bonds & Fixed Income

    Tips For Recession-Proofing Your Portfolio

comments powered by Disqus
Hot Definitions
  1. Ghosting

    An illegal practice whereby two or more market makers collectively attempt to influence and change the price of a stock. ...
  2. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  3. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  4. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  5. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  6. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
Trading Center