Defensive Investor Qualities

November 8, 2020 by Laxman Sonale Leave a Comment

Hello friends, in today’s article, we see the defensive investor qualities from the intelligent investor book, In this article, the author gives us two types of intelligent investors. They are defensive investors and enterprising investors. Defensive investor qualities that help you to avoid stupidity and save money from losing money in the market.

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Defensive investor Qualities:-

The defensive investor has some quality, they are as follows:

Emotionally Challenging: If you want to be a passive investor you have to be emotionally stable, so a defensive investor is more emotional challenges. (Defensive Investor Qualities)
Detachment from the hullabaloo of the market: They have to courage to ignore the market.

Some knowledge for defensive investor qualities:

The risk lies within ourselves: Investor is the enemy of himself, so risk lies within ourselves. So do financially safe and make minimum trading.
Asset allocation has nothing to do with age: Making money in the stock market does not need any age. If you want to make an investment in the stock market you need money.
Fundamental circumstances: This whole depends upon the fundamental circumstances of our financial life.
How much money put in stock: The author suggests that in stock you put your all money of 25% in the stock market. remaining use for your lifestyle. never put 100% of the money in stock, Those only put 100% money who face the last market crash. (Defensive Investor Qualities)
Change allocation when your circumstances change.

When to put 100% in Stocks:

author give some criteria for putting 100% money in stock, they are as follows:

Survived a previous bear market.
Did not sell during a previous bear market.
Bought more stocks in the previous bear market.
Set aside cash for at least one year.

author strictly says’s ” Don’t fool yourself into believing that it’s easy if you haven’t lived through a bear market.”

Four rules for a defensive investor:

the author gives us some important rule for the defensive investor, they are as follows:

Diversification: defensive investors have to do the diversification of its stock minimum of 10 to 30 stock.
Large, prominent, conservatively, financially comfortable company: choose this type of company for the defensive investor.
The long record of continuous dividend for 10 years: Those companies have to be the record of 10-year dividend yield. (Defensive Investor Qualities)
Limit on price: Benjamin gram Recommended 25 X average earnings over past 7 years, maximum 20 X last year earnings.

after this rule, the author gives us some advice for the defensive investor.

Some advice for a defensive investor:

Buy the company stock at a reasonable price
after that then relax on investment
Turkish proverb is that “After you burn your mouth on hot milk, you blow on your Yoghurt.

Peter Lynch, the greatest fund manager: peter lynch give the simple philosophy of investing for the defensive or common investor, that is common knowledge of the product that we use daily. after that, you can do its analysis of the stock. (Defensive Investor Qualities)

Benjamin gram gives us more advice for the defensive investor, they are as follows:

And some more advice:

Don’t invest in only one stock, buy a minimum of 10 stocks.
Trade less
Defensive investors win the race by sitting quietly.
Realizing that you can’t predict the future.
Dollar-cost averaging: This concept we see in the other article.

If you want to become a defensive investor you have to follow this rule and also advice. if you follow this you will be a rich man after long term compounding effect. (Defensive Investor Qualities)

Those people don’t have knowledge of finance and balance sheet or accounting, those also become defensive investor by Taking by minimum charges of INDEX FUND. So this is all about the defensive investor.

Seth Klarman 30 big points on investing