Definition
The term conservative investing refers to a strategy that attempts to preserve the value of a portfolio by investing in low risk securities. A conservative investment portfolio would include blue chip stocks as well as fixed income securities.
Explanation
The primary objective of a conservative investing strategy is to prevent a loss in a portfolio's value. Conservative investing is also considered a preservation of capital strategy. This approach is frequently used by retirees that use the money in their portfolio to pay for monthly living expenses, and trades off the opportunity for higher returns in exchange for lower risk.
A conservative portfolio would consist of very low risk, fixed-income investments such as Treasury Bills, money market accounts, and certificates of deposit. Equities held in the portfolio would include blue chip stocks, which are also known as large cap stocks. This strategy is well suited to individuals with relatively low risk tolerance scores.
Related Terms
- The term risk of ruin refers to the probability an individual could lose all of their capital investments and the recovery of loss is not possible. The risk of ruin concept has its roots in the gambling industry, but has since been associated with both the investing and insurance industries.
Moneyzine EditorSeptember 21st, 2023 - The term preservation of capital refers to a strategy that attempts to prevent a loss of funds in a portfolio. Preservation of capital is important to investors that are not willing to risk a loss, even in the near term.Moneyzine EditorNovember 6th, 2024
- The term 90 - 10 strategy refers to the creation of an investment portfolio that allocates 90% of the fund's assets to interest bearing securities and 10% to higher risk securities. The 90 - 10 strategy is a relatively conservative approach to investing.Moneyzine EditorNovember 6th, 2024
The term 100% equities strategy refers to the creation of an investment portfolio that consists solely of common stock. A 100% equities portfolio can be assembled by an investor, or take the form of a pooled account such as a mutual fund.Moneyzine EditorJanuary 5th, 2024
The term capital growth strategy refers to the creation of an investment portfolio that seeks to maximize value in the long term. A capital growth portfolio will allocate more than half of the fund's assets to equities.Moneyzine EditorJanuary 10th, 2024
