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As the name suggests, defensive investment strategy is the portfolio management strategy which aims at investing in low-risk products. Defensive investors choose bonds, treasury notes, money market funds, and defensive stocks. Defensive stocks include stocks which are undervalued, less volatile, steadily growing, and/or offering reasonable dividends. Defensive investors must be very strict with their money management and investment product selection.

The main advantage of a good defensive investment strategy is the minimized risk of losing the capital. Other advantages include better planning of investments, almost steady and predictable income, and better use of risk-minimizing practices like close stop-losses. Defensive investment strategy suits beginners, investors with less risk-tolerance and investors having less time to monitor their portfolio.

Defensive investment strategy is a low profit strategy, and often requires much more capital investment to get a targeted profit. When investing in stocks or similar products, defensive investors are limited with their options and often limited with their profit maximizing techniques such as leverage or margin trading. This type of investment strategy is not so suitable for traders looking for short-term profits and for professional traders willing to spend most of their time trading.

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