Capital Preservation

Reduce downside risk and lock in profits

Capital preservation is a conservative investment strategy characterized by a desire to avoid risk of loss.

In modern portfolio theory, capital preservation usually means investing in guaranteed investments, typically bonds and money market funds that are associated with low annual returns.

The use of exchange traded funds coupled with capital preservation trading stops allows an investor to invest in a diversified basket of companies, accept higher reward outcomes, reduce portfolio volatility risk, and simultaneously preserve their capital base. 

"If one could preserve their capital by missing the worst 5 days of each year from 1966 to 2001, you would amass a portfolio that would be 84 times as large as a buy-and-hold approach."

Dry powder for another day

The secondary benefit of using a regular capital preservation strategy in your investing is you will have more capital to reinvest into the marketplace on your next trade.  The impact on results over the long-term is staggering when you have more capital to invest on each trade.

Regularly review your portfolio

Undertaking this approach to the markets does require that an investor actually monitor and review their portfolio holdings on a regular basis.  With the advent of on-line trading over the internet, most people can accomplish this in a few minutes a week and set advance sell orders and trading stops on any holding in their portfolio to preserve their capital.

Capital preservation trading strategies can magnify your long-term portfolio results. 

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