Build a Defensive Portfolio - Your Hedge Against a Major Market Decline

If you a worried about a significant market decline, you can protect your assets with a defensive money management and investment plan. Here are some suggestions:

Keep debt at or near zero.
Accumulate a substantial cash reserve in U.S. Treasury-only money market funds.
Buy short-term U.S. Treasury bills directly from the U.S. government.
Own two exchange-traded funds that own gold bullion.
Own high-quality dividend-paying stocks.
Own long-term put options.

Three more important defensive money management measures include: Limit your stock holdings to an amount that you could afford to lose if they went to zero dollar value. Pay down your mortgage quickly by making extra payments. Finally, do not own much, if any, of your employer's stock. You do not want the possibility of losing your job and your nest egg too.

Every person would be wise to draw up a defensive money management and investing plan and stick to it.

Related Articles:

Dividend-Paying Stocks
Gold and Silver Exchange-Traded Funds
Long-term Options - LEAPS
Options - Calls and Puts
U.S. Treasury Bills, Notes, and Bonds
U.S. Treasury Money Market Funds Are Safe

Posted January 13, 2007.