Aggressive or defensive investing: find the strategy that suits you

Investing is a personal journey, and at Vive, we understand that your goals are unique. That is why it is important to choose an investment strategy that suits you. In this blog, we explore the difference between aggressive and defensive investing, so that you can make an informed choice that best strengthens your financial future.

What is aggressive investing?

Aggressive investing is a strategy where you aim for higher returns by investing in assets with a higher risk. Your portfolio then mainly consists of more volatile investments, such as stocks. The potential for growth is great, but fluctuations in value can also be substantial.

• Example: Suppose you invest €10,000 in an aggressive portfolio full of technology stocks. If the sector performs well, your investment could grow to, for example, €15,000. But if the market is unfavourable, the value could also drop to €7,000 or less.

Who is aggressive investing suitable for?

• Investors with a long-term investment horizon (for example, 10 years or more).
• People who are willing to take more risk in exchange for the chance of higher returns.
• Investors who are emotionally and financially able to tolerate market volatility and possible losses without selling in a panic.

What is defensive investing?

Defensive investing is a more conservative strategy that is aimed at minimising risks and protecting your invested capital. The portfolio is mainly filled with stable, less volatile investments, such as bonds, savings accounts, or other fixed-income securities. The goal is a stable but modest return, with as few fluctuations as possible.

• Example: Suppose you invest €10,000 in a defensive portfolio that largely consists of bonds. The value will likely grow slowly – perhaps to €11,000 over a few years – and the risk of large losses is much smaller. In the worst case, the value remains approximately the same, without major drops.

Who is defensive investing suitable for?

• Investors with a shorter investment horizon (for example, less than 5 years).
• People who are risk-averse and prefer stability and security over high returns.
• Investors who want to protect their capital, for example, because they need the money in the foreseeable future for a specific purpose.

Aggressive versus defensive: the key differences

1. Risk vs. return:
   • Aggressive investing: Higher risk, with potential for higher long-term returns. Ideal for investors willing to accept market fluctuations.
   • Defensive investing: Lower risk, with stable but modest returns. Suitable for investors who value capital preservation more than high profits.
2. Investment horizon:
   • Aggressive investing: Suits a long-term horizon, for example, pension accrual over 15–20 years.
   • Defensive investing: Suits a shorter horizon; for example, when the capital is needed within a few years.
3. Volatility:
   • Aggressive investing: More exposure to market fluctuations. You can achieve substantial profits, but also temporarily see large losses.
   • Defensive investing: Less sensitive to market fluctuations; results in a more stable portfolio with fewer extreme outcomes.

Which strategy suits you?

The choice between aggressive and defensive investing depends on your financial goals, risk tolerance, and the time you have to invest. Ask yourself the following questions:

• How much risk am I willing to take?If you are comfortable with the idea that your portfolio may decrease in value before it increases again in the long term, an aggressive strategy may suit you. If you become nervous quickly about a loss, a defensive approach feels safer.
• How long do I want to invest my money?If you have a long term in mind (for example, >10 years, such as for a pension), you can take maximum advantage of compound growth over the years with aggressive investing. If you need the money within a few years, a defensive strategy helps to protect your capital against short-term fluctuations.
• How do I react to market fluctuations?Imagine the stock market drops 10% in a quarter. Do you panic? Anyone who is inclined to sell during drops out of fear is better off with a defensive portfolio. If you can calmly sit out such drops, an aggressive portfolio is an option.

A balanced approach: combining aggressive and defensive

At Vive, we know that many investors do not purely fit into one box. That is why we offer the possibility to put together a balanced portfolio, in which you combine aggressive and defensive elements. You then benefit from the growth potential of stocks, while simultaneously building in stability with bonds.

• Example: You choose 60% of your investments in stocks (aggressive) and 40% in bonds (defensive). This mix can work well: the stocks allow your capital to grow when the market rises, while the bonds provide a buffer against potential drops. This is how you spread the risk and seek the middle ground. (Want to know more? Read our blog about the benefits of a balanced investment portfolio – internal link.)

Conclusion

There is no one-size-fits-all solution when it comes to investing. Whether you choose aggressive or defensive investing depends on your personal situation and preferences. Aggressive investing can yield higher long-term returns, but involves more risk. Defensive investing offers more stability and protection of your capital, but typically with lower potential yields. By clearly charting your goals and risk tolerance – possibly with the help of determining your risk profile (internal link) – you can choose the strategy that best suits you.

At Vive, we are ready to help you with this. In our app, you can easily create an investment strategy that suits you.

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