conservative stock investing

For the stock investor still hurting from the 2008 market crash conservative stock investing is attractive. Each of the world two largest economies, the European Union and the United States, is dealing with its own potentially disastrous debt crisis. There may not be enough time for the US congress to switch from posturing to passing the necessary legislation to avoid a debt default by the USA. As European officials drag their feet the so called PIIGS debt crisis spreads from Greece to Portugal, Spain, and Italy. How would the world economy respond to twin debt defaults on opposite sides of the Atlantic? How would such a situation affect stock investors and traders in the USA? Is conservative stock investing the route to take? A number of US companies, like Microsoft with $50 Billion in offshore reserves, have heaps of cash that amount to a significant margin of safety . In considering how to stock investing today we should first consider just what is conservative stock investing. What does conservative mean and is a conservative approach always the best choice? Where do the basics of stock investing and share tips, fundamental and technical analysis and the use of time honored tools such as Candlestick analysis fit in this story?

There are degrees of conservative investing and it is important to recognize where you stand. These degrees include:

1. Totally concerned and committed to just about not risking a penny of your cash but desiring to at least keep even with inflation.

2. Committed to minimal risk of your money but desiring to see it grow a little more than inflation.

3. Conservative in most cases but willing to use a small portion of your cash to grow faster than inflation but not to the extent of taking wild risks.

If you fall in the #1 category, safe investments can be found:

• Bonds, bond ETFs or bond mutual funds


• Some stocks (companies) with a 10 year or longer history of paying strong dividends, ETFs or mutual funds based on dividend paying stocks


• US treasuries, ETFs or mutual funds based on treasuries

Stock Market Investors

Investing is much more than a numbers game, but you can’t get very far from numbers if want to understand what’s going on in the market. When you buy a share of stock, you are taking a share of ownership in a company. Collectively, the company is owned by all the shareholders, and each share represents a claim on assets and earnings. The most common ways to divide the market are by company size (measured by market capitalization), sector and types of growth patterns. Investors may talk about large-cap vs. small-cap stocks, energy vs. technology stocks, or growth vs. value stocks and Stock Tips, for example. Over the short term, the behavior of the market is based on enthusiasm, fear, rumors and news.

Most serious investors have a keen sense of their own risk/reward profile--their investment style so to speak. New investors on the other hand may be at loss in terms of finding and embracing a particular investment style. They've taken one look at their 401k, called their broker and said; "Um no thanks; sell, sell, sell!" Theirs is a resounding exit strategy and, for many more established investors it's either that or a steadfast sideline strategy. Well, that's no fun. You have to be in the game to win at the game.

The concept of position sizing is a very important, straight forward strategy that every trader should implement. Using the practice of position sizing will dictate the amount of money to allocate for a trade. The rule of thumb is to never risk more than 2% of your trading funds on any one position.