The first question I always get asked by newbie investors is focused around what share to buy.<\/p>\n
Through some seminars I\u2019ve held at university recently I\u2019ve had the opportunity to gain valuable insight into how fellow students invest and what makes a share a buy for them.<\/p>\n
But one thing has become clear \u2013 the last question newbie investors should ask is \u2018what share to buy\u2019.<\/strong><\/p>\n Amongst these investors are several dreamers that think they\u2019ll make it big by day trading or get rich quickly by buying and selling futures.<\/p>\n This is the first lesson on what share to buy!<\/p>\n When buying a share, look at it as a part ownership in a company with the intention of being a part owner FOREVER. <\/strong>Day trading and selling futures may appear glamorous but every investor I know has ended up losing a lot of money \u2013 it\u2019s just too risky.<\/p>\n Now thankfully most of those I met were students that have worked hard for their money and just want to get some moderate gains in this low-interest rate environments.<\/p>\n Does this sound like you? Then keep reading!<\/strong><\/p>\n If you are one of these investors then before asking \u2018what share to buy\u2019 there\u2019s a few things we must learn and we\u2019ll start with defensive stocks.<\/p>\n According to Investopedia;<\/p>\n A defensive stock is a stock that provides a constant\u00a0dividend<\/a>\u00a0and stable earnings regardless of the state of the overall\u00a0stock market<\/a>. Because of the constant demand for their products, defensive stocks tend to remain stable during the various phases of the\u00a0business cycle<\/a>.<\/p>\n Doesn\u2019t that sound great?<\/p>\n Instead of buying and selling every day\/week\/month and being worried that you were going to lose money you can buy a stock that will consistently reward you over time. Well, a simple phrase that I learnt early on is;<\/p>\n Eat, drink, smoke and pay the bills!<\/strong><\/p>\n Eating: Consumer defensive stocks such as Unilever tend to hold up better than other stocks during recessions. After all, we still need to eat to survive.<\/p>\n Drink: alcohol consumption is addictive and people still tend to drink during recessions. This makes stocks such as Diageo solid, safe buys.<\/p>\n Smoke: Same as above. Unfortunately, even during tough times people just can\u2019t kick the habit of consuming tobacco.<\/p>\n Pay the bills: If a bill lands on your door mat you have to pay it! This makes utility stocks solid buys. Everyone needs gas, electric and heating. Taking a look at companies such as General Electric and National Grid may be worth it to avoid declines.<\/p>\n There\u2019s one thing I haven\u2019t included in that phrase and that\u2019s healthcare!<\/p>\n If people get ill then they will still buy drugs for treatment. Healthcare and pharmaceuticals are great recession-proof stocks because of this.<\/p>\n So, let\u2019s look at some of my holdings;<\/p>\n Glaxo Smith Kline (GSK) \u2013 pharmaceutical stock. Even in recessions people still need medicine<\/p>\n Unilever (ULVR) \u2013 People don\u2019t stop buying consumer staples in recessions and brands offer a great barrier against pricing pressures.<\/p>\n Cardinal Health (CAH) \u2013 One of only three drug distributors in the USA in an effective oligopoly<\/p>\n Altira (MO) \u2013 Smoking is addictive, people will still buy tobacco even when times get real tough.<\/p>\n By buying defensive, we can hold these stocks forever and GROW our wealth over time as these stocks produce moderate gains.<\/p>\n We are never buying and selling on a whim and we are never being kept up at night by the need to chart or trade.<\/p>\n We are confident that our part-ownership in these companies is secured and that they won\u2019t go out of business when times get tough.<\/p>\n Therefore my answer to the question \u2018what stock to buy\u2019 is always;<\/p>\n A defensive one!<\/strong><\/p>\n But this is just one lesson on what share to buy – This will become a weekly series, follow this blog for further posts.<\/p>\n","protected":false},"excerpt":{"rendered":" The first question I always get asked by newbie investors is focused around what share to buy. Through some seminars I\u2019ve held at university recently I\u2019ve had the opportunity to…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/366"}],"collection":[{"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/comments?post=366"}],"version-history":[{"count":0,"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/posts\/366\/revisions"}],"wp:attachment":[{"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/media?parent=366"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/categories?post=366"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/frugalstudent.co.uk\/index.php\/wp-json\/wp\/v2\/tags?post=366"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nSo how do I know if a stock is defensive?<\/p>\n