top of page
Live Off Dividends

4 Investment Protection Strategies

Updated: Feb 16, 2023

“Rule No. 1: Don’t lose money. Rule No. 2: Don't forget Rule No. 2.” – Warren Buffett
4 Investment Protection Strategies by ART Invest
4 Investment Protection Strategies. Picture by William_Potter on Canva

As it is for businesses, protection is also vital for a robust personal finance plan. It is one thing to earn, save, and invest. It is another to protect the assets you accumulate. And, the latter is equally important. If you do not protect what you have, one day, you might lose it. Then, it might be too late.


That is why you need to learn protection. So, how do you go about protecting your savings and investments? Here, we teach you.


4 Investment Protection Strategies


Diversification


Exactly as the world’s greatest living investor, Warren Buffett, said, rule no. 1 in investing is not to lose money. A time-tested way to do that is to diversify your holdings. Portfolios diversified across asset classes tend to outperform those concentrated in just one. And, even within the same asset class, stocks, for example, spreading your investment across multiple companies and industries can help to reduce or eliminate the unsystematic risk of stocks.


While the ideal number of stocks you should own depends on factors such as your knowledge and skills, financial goals, time horizon, and risk appetite, many experts peg the magic number at 30 for easy manageability.


Learn more about diversification in the following article:


Regular Monitoring


Another effective strategy to use in protecting your investments is regular monitoring. This is even more important for short-term investors. Markets are prone to wild price fluctuations and you would not want to be caught up in the wind. However, even if you are a long-term investor, you also need to be regularly monitoring your portfolio. It is recommended you do so at least once every six months.


Periodic reviews of your portfolio are important as they help you find out if you are still on track to achieving your financial goals.


Investing for Dividends


A popular strategy to protect investments is to invest safely ab initio. Investing in high-yield dividend stocks helps to ensure that even if your capital does not appreciate much, you can still have a guaranteed income. Dividends account for a huge portion of returns on stocks. In fact, companies that pay high dividends tend to grow their earnings at a very fast rate. That, in turn, tends to correspond to higher share prices for them.


As a result, if you even decide to invest in just traditionally dividend-paying stocks, you can expect their yearly payouts to increase.


You can find a whole article about dividend investing portfolios below:


Using Stop Loss


Finally, if you are a regular trader, endeavor to always use stop-loss orders. To minimize your losses on trades that go against your anticipated direction, a stop-loss order is automatically triggered when your position falls to your set price.


For example, if you buy a stock at $20 and set the stop price at $17, it will be automatically sold once the price is hit. Thus, stop-loss orders help to protect your trades against downside risk.


These and many other tips are included in my new ebook which is just one click away:

 

Hope this was useful for you! If so, hit the like button to make me feel good. Please note that the above content is not investment advice and shall be considered only for informative purposes. Feel free to share your opinions in the comments section below. Subscribe to get more unique content! You might be also interested in: The two ways to earn money Personal Finance 101 Secrets of Fundamental Analysis

0 comments

Comments


Stock Market Analysis

More Investing Articles

bottom of page