Shooting For Safe Investments

by David Jenyns on March 16, 2009

Strictly speaking, there is no such thing as a non-speculative stock. The moment you take a position in a stock you are speculating, sometimes without realizing it. Take some notes from this historical piece; much still rings true today.

From time to time the market returns for “safety” to such classic defensive securities as utilities, food, department stores, etc., when the economic weather is getting rough. They generally hold up better in a bad market, though sometimes only a shade better.

For instance, on Sept. 27, 1960, while the Dow-Jones Industrial Average dropped 1.38 percent to close at 577.14, the Utility Average was doing only 0.16 per cent better by going down 1.22 percent to 92.48.

Nobody is likely to dispute you in classifying an insurance stock as less speculative than, say, a space-age stock.

An insurance stock is the nearest to a “defensive” stock that I can think of. According to a Capital Gains Research Bureau report dated March 18, 1960, Continental’s holdings of bonds totaled $448,864,935; preferred stocks, $35,621,067; common stocks, $858,865,527.

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