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Macroeconomic Aspects for Defensive Stock Investing

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Submitted By BerniGolf
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Macroeconomic aspects for defensive stock investing

In the past decade, the stock market has had many ups and downs and private investors perceive stock investing more and more speculative and unpredictable. Part of this perception roots from the general trend towards computerized high frequency trading, which in 2010 accounted for up to 70 % of all trades made in the market. High frequency trading is done by mega computers which are programmed to take advantage of the slightest changes in the stock price by buying and selling within fractions of a second. Those programs pay no regard to the actual social and economic value of the company. Trends like that and criminal like actions by almost all major banks around the world (including inside trading, misinformation of customers, ruthless risk taking, etc. which lead to the worldwide economy crisis in 2008) leave private investors with the feeling that they get betrayed and can’t keep up with the rapid stock market. They might think that stocks are not a good investment tool for private investors anymore. However, statistics show that stocks measured over any ten-year time period for the last 75 years, have yielded a higher return than conservative investments in bonds or bank certificates of deposit (Kelly, 2007). For the mentioned and several other reasons, one still should consider using stocks as an investing tool. Consequently, if you can’t win the very short term, high frequency trading game, you might want to play a different game and invest in stocks longer term oriented. This might lead you to defensive stock investing, an investment method that is not seeking fast profits in the short run but rather continuous growth and eventually high profits in the long run. Probably the most famous and successful defensive stock investor is Warren Buffet. He believes in analyzing the market, recognizing mega trends…...

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