Defensive Stock Strategies: Protect Your Capital & Generate Income

Using a defensive stock strategy involves choosing stocks with the idea of preserving and protecting capital. Instead of trying to maximize capital appreciation, you are trying to minimize losses. The idea behind this strategy is to make small, regular gains instead of going for home runs.

With this type of strategy, an investor will look for companies that are well-established in their industries. They will buy stocks of companies that regularly issue dividends. These companies will provide them with some consistent returns even if they do not appreciate much in value.

One of the most important aspects of this strategy is locating stocks that are low in volatility. Investors in this type of strategy like to find companies that have slow and steady growth. They like to find companies that are relatively consistent, rather than way up one day and way down the next.

Another important part of the strategy is diversification. Investors need to be able to put money into many different sectors of the market. This way, if one particular sector is not performing well, the other stocks in other sectors will be able to pick up the slack of the portfolio.