What is a Conservative Investment Strategy?

Answer:
A conservative investment strategy is one where

preserving capital and minimizing risk is of utmost concern. This strategy invests in lower risk securities like money market and fixed income securities, and blue chip and large cap equities rather than riskier securities in an attempt to preserve a portfolio’s value. In addition to preserving capital, conservative investment strategies also often look to generate current income.

Conservative investors tend to have a low to moderate tolerance for risk. The thought of losing money in the stock market motivates them to choose “safer” investments.

While a conservative investment strategy has its place for some individuals in some circumstances and might be able to guard against inflation, using a conservative strategy isn’t likely to lead to an increase in value over time.

Some funds such as age-based asset allocation funds (such as might be offered in a 529 college plan) use different strategies based on the individual’s time frame.

For example, if you open a college fund for your baby and choose a fund that bases the strategy on age, the initial investment strategy will be more aggressive while your child is a baby and then move to a more conservative investment strategy when your child nears college age and preserving funds becomes more important than growth.