Stock Market and Investment Tips For The Defensive Investor

It is an unfortunate fact that money, unlike rabbits, will not mate and multiply by itself very fast at the low interest rates offered by banks today.

In fact, due to the inevitable inflation of the money supply by the central banks of the world, it will tend to lose value if you sit on it.

Investing is key, but it is the natural order that the average investor will want a strategy that promotes growth without risking the loss of his hard earned principle.

The following tips on how to play the stock market are a good place to start.

1. Where Do You Want To Be?

Before setting foot into the market, you must decide what you realistically want to get out of it terms of profits, over what time period, and what sort of risks you are willing to accept. Until you have clearly worked this out in your mind, you have no basis for setting a course.

2. Pick a Strategy.

Investment strategies, especially for a financial ETF are legion, and they range from the reasonable to the ridiculous. Do extensive research to learn what tactics that suit you, per the mission objectives you set in step one, and then learn all you can about them.

3. Ponder the Risks

Risk is inevitable. The wise strategist minimizes risks as much as possible, but at the end of the day, all factors can never be completely known. While hopefully your investment strategy will be less risky than poker, take a bit of sage wisdom from players of that game and never put anything you can’t stand to lose on the table.

If you are very risk adverse, you may want to look into annuities as an investment.  An annuity is generally considered a boring investment, but in many cases you can find steady and consistent growth with these financial instruments.

4. Ponder the Payoff

Making a profit is the whole point of investing, right? You want to make sure that what you stand to make will pay off adequately in terms of both the cash you invest AND in terms of your time. You only get so much time on this Earth, and it is valuable. Remember, making money in the market comes down ultimately to only two skills, knowing when to buy, and knowing when to sell.

5. The Parachute

Don’t ride a burning plane to the ground. Hit the silk, and live to fight another day. If a stock drops 10%, sell it. Now.

Some investors feel that they can take on a little bit more risk with a 25% stop loss, but in many cases after a stock falls this far they then feel that they have lost too much money and hold on longer hoping the investment will recover.  In many cases it never does and the the investor is forever second guessing himself when it comes time to buy and or sell a stock again.

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