A market slump like the one we’ve experienced since 2007 demonstrates the appeal of a conservative, risk-averse portfolio investing philosophy like ours. While the well-established companies we invest in may not fly as high as speculative stocks when the market is soaring, they hold up much better in market downturns.

As part of our portfolio investing strategy, we diversify by spreading the investments of clients of our Successful Investor Wealth Management service out across the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; Utilities), even when much of the market’s action is concentrated in one or two industries or sectors.

That’s because the market’s hottest segments can unpredictably jump from hot to cold. Just as important, cold stocks with hidden assets can unpredictably jump from cold to hot.

We downplay or avoid stocks in the broker/public relations limelight. That limelight breeds unrealistic expectations, and dashed investor expectations lead to plunging stock prices.

Two more ways our philosophy can help your portfolio investing

Here are two additional facets of our portfolio investing philosophy. You may only get to apply them at market extremes, but they are crucial to strong long-term results.

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Don’t buy aggressively when stock prices have soared and there’s a lot of speculation in the market. At times like that, you should steer your portfolio investing away from low-quality, speculative investments. More so than usual, it’s particularly important to resist any urge you may feel to buy on margin or to buy options.

Mind you, you shouldn’t stay out of the market simply because it seems high or speculative. A high market can keep going higher for years.

Don’t sell indiscriminately when the market is down. Of course, it’s always a good idea as part of your portfolio investing to sell any low-quality stocks, regardless of the market outlook. At times, you’ll also want to sell formerly high-quality investments that have lost their direction and appear to be struggling against overwhelming headwinds. But you shouldn’t sell high-quality stocks just because their prices have dropped. Nor should you sell them just because they’ve gone out of investor favour. Well-established, but out-of-favour stocks can provide great opportunities for patient investors.

If you’d like me to personally apply value-investing principles like these to your investments, you should consider becoming a client of my Successful Investor Wealth Management service. Click here to learn more.