3 Tips For Conservative Investing

We recently posted an article suggesting that boring investing is the way to go, and for those concerned with generating savings and avoiding significant losses, that’s certainly true. Generally, a boring, methodical approach is the “safest” way to put away money (though it should be noted that investment is inherently risky no matter how boring it may be). But what does that mean when you get into the details?

In the previous article we provided a helpful list of tips that ultimately amount to “boring” investing. We’re going to follow up here with a few more detailed explanations of how to handle an investment portfolio in a more conservative, risk-averse manner.

1. Abandon Your Emotion

You may have heard before that it’s wise to check your emotions at the door when you enter an investment situation. We came across a full psychological examination of emotion for investors that boiled down to one crucial point. That point was that research suggests that investors are often driven by their emotions to make poor investing choices. This can mean a number of different things, but it primarily comes down to two tendencies. The first is to allow recent gains or losses to dictate activity, and the second is favoring (or ignoring) stocks and companies based on personal preferences for products or services. The conservative investor should ignore all of these things and instead make decisions based solely on market outlook. See Below for the 3 Tips For Conservative Investing

3 Tips For Conservative Investing

2. Learn To Cut Losses

This branches off nicely from the idea of curbing emotion. A write-up of some of the top traits of successful investors made the point of learning when to cut your losses. That means that it’s important to know when to get out of an investment—even if you’ve lost money on it. Most of us will be psychologically inclined to “ride it out” and try to make up ground. It’s almost a pride thing. But again, emotion has to be out of the picture in this scenario. It’s exceedingly important, particularly for an investor seeking to adopt a conservative mindset, to know when to take a small loss rather than risking a big one.

3. Diversify

Finally, there’s the idea of diversifying your portfolio—which is the oldest trick in the book, but one that can’t be mentioned too many times. In case you’re relatively new to the investing game, the idea is that investing in a single stock or industry leaves you entirely subject to that stock or industry’s performance. On the other hand, if you spread your money out across a number of unrelated stocks, then the impact is less if one of those stocks should suffer. Naturally, you also miss out on the “boom” potential of a single stock skyrocketing—but then, we’re talking about the conservative approach here. Diversification simply mitigates the risk of significant losses.

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