Conservative investing is one of the investing strategies. With this, the investors prioritize protecting his or her capital over getting a high return. This strategy prefers lower-risk securities (like money market securities or blue-chip) in order to gain maximum protection for the investors’ investment portfolio value.
Mostly, within a conservative investing around half or more of the portfolio is held in the debt securities, instead of equities.
Defining Conservative Investing
The risk tolerance in this strategy ranges from low to moderate. Thus, the portfolio will consist of a big amount of fixed income, low-risk investment. Besides, it may also have a small portion of high-quality stocks or funds.
This investing strategy can provide you the protection against inflation, yet it does not promise a significant return. Commonly, investors choose this strategy once they get near their retirement age.
The Portfolio Strategy
There are two kinds of the portfolio for this strategy, they are the preservation of capital and preservation of current income. The capital preservation strategy maintains the current capital level while preventing any portfolio losses, at the same time.
To do that, this strategy involves short-term and safe instruments, such as certificates of deposit. Yet, this preservation may not be a good choice for an older investor who wants to maximize his or her current financial assets.
Meanwhile, the preservation of the current income strategy involves the investment asset that pays them above-average distributions. The example of that asset is the ones with dividends and interest.
Current income is, generally, steady. This strategy is suitable for those investors who wants to establish entities that pay them consistently, without a big risk of default.
The Alternative Strategies
For those investors who want a more aggressive strategy, than he or she can choose the growth portfolio. The growth portfolio, different from conservative strategy, seek the maximum capital to increase the portfolio value.
This portfolio usually consists of high-risk small-cap stocks.
