12 June 2022 7:48

Clarification about the definition of ‘defensive portfolio’ in the book ‘The Intelligent Investor’

Who is a defensive investor?

According to Graham, the defensive investor is an investor who is unable or unwilling to put in the time required to be an enterprising investor. Think of the difference between the two as the defensive investor is passive, where the enterprising is more active.

What is Investmenting?

Investing is the process of buying assets that increase in value over time and provide returns in the form of income payments or capital gains. In a larger sense, investing can also be about spending time or money to improve your own life or the lives of others.

What do you mean by asset allocation?

Asset allocation involves dividing your investments among different assets, such as stocks, bonds, and cash. The asset allocation decision is a personal one. The allocation that works best for you changes at different times in your life, depending on how long you have to invest and your ability to tolerate risk.

What is defensive portfolio?

A defensive portfolio is one comprising stocks that don’t have a high beta. Stocks in this portfolio are relatively isolated from broad market movements. In this type of portfolio, the strategy is to bring down the risk of losing the principal.

What is an example of a defensive investment?

Defensive investments focus on generating regular income, as opposed to growing in value over time. The two most common types of defensive investments are cash and fixed interest. Cash investments include: High interest savings accounts.

What are the 3 types of investors?

Three Types of Investors

  • Pre-investors. This is a catch-all term for people who have not yet begun investing. …
  • Passive Investors. …
  • Active Investors.

What are the 4 types of investments?

There are four main investment types, or asset classes, that you can choose from, each with distinct characteristics, risks and benefits.

  • Growth investments. …
  • Shares. …
  • Property. …
  • Defensive investments. …
  • Cash. …
  • Fixed interest.

What is a portfolio in investing?

A portfolio is a collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents, including closed-end funds and exchange traded funds (ETFs). People generally believe that stocks, bonds, and cash comprise the core of a portfolio.

What is meant by defensive shares explain the characteristics of defensive shares in investment management?

A defensive stock is a stock that provides consistent dividends and stable earnings regardless of the state of the overall stock market. There is a constant demand for their products, so defensive stocks tend to be more stable during the various phases of the business cycle.

How do you build a defensive portfolio?

Making a portfolio defensive

There are a number of ways to make a portfolio more defensive. One technique is to target stocks with lower levels of historic volatility or higher quality. Some companies, due to industry, competitive position, or strong financials, have records of lower volatility in down markets.

What are the defensive sectors?

There are three main defensive sectors: Utilities, Consumer Staples, and Health Care. Utilities: Water, gas, and electric utilities are needed in all phases of the business cycle.

What is defensive industries with examples?

Companies in the utility industry, for example, are defensive because consumer demand does not decline as much during downturns. Consumers need electricity, water, heating, and air conditioning, whether the economy is in a recession or not. The other primary defensive industries are consumer staples and healthcare.

Which of the following is are defensive industry?

Example of Defensive Industries

Many examples are food grain industries, medical industries, water service industries, etc. Water supply and irrigation systems are some of the effective examples in the US. During the recession period in the USA, it continues to grow despite low consumer income.

What is a defensive equity strategy?

Defensive Equity is an investment strategy that seeks to provide returns that are similar to equity markets but with less risk. It commonly targets stocks of companies that have demonstrated strong fiscal health and exhibited less volatility than their equity market counterparts.

What percentage of portfolio is defensive?

Always have at least 33% of the portfolio invested in defensive shares.

What is a defensive fund?

Defensive sector funds are mutual funds or exchange-traded funds (ETFs) that invest in companies in recession-proof industries. These industries are called defensive sectors because they tend to stay stable whether the market is healthy or not.

What are the best defensive assets?

Here are the best Consumer Defensive ETFs

  • Invesco S&P 500® Eql Wt Cnsm Stapl ETF.
  • Vanguard Consumer Staples ETF.
  • Consumer Staples Select Sector SPDR® ETF.
  • Fidelity® MSCI Consumer Staples ETF.
  • iShares Global Consumer Staples ETF.
  • Invesco DWA Consumer Staples Mom ETF.
  • First Trust Nasdaq Food & Beverage ETF.

What are considered defensive assets?

An asset bought with the aim of producing an income and/or an increase in value over time. The possibility that your investment may fall in value or earn less than expected. and less volatile than growth investments.

What are defensive stocks?

Defensive stocks are stocks that are considered safer. They might not offer the same opportunity for massive gains that more aggressive stocks do, but they come from sectors like consumer staples and healthcare that are expected to perform in essentially any economic conditions.

Do I need defensive assets?

Defensive assets are an inexpensive insurance policy

Defensive assets provide an important insurance policy because they have typically performed well when share markets have not. Across history there have been periods of time where growth assets like shares have done poorly.

What is the difference between growth and defensive assets?

Growth assets tend to be those whose returns can grow over time, such as equities and property. The risks on these types of assets are that there is no guarantee of capital being returned. Defensive assets on the other hand tend to pay fixed returns.

What is growth and defensive?

Generally speaking, growth assets are higher risk and higher reward investments. Defensive assets are lower-risk lower-reward. However, everyone has a different interpretation of ‘risk’ and ‘reward’. Most academic literature says ‘risk’ is volatility.