Hence, investors have seen poor appreciation returns. The good news is that operating yields and cash distributions give investors a predictable downside. Solid cash distributions validate an investment, are emotionally gratifying, and provide a reasonable return while waiting for the marketplace to recognize intrinsic value. Smart investors don't buy only for today. Smart investors know there are offensive and defensive investments.
Smart investors allocate funds between offensive and defensive investments.
With stocks continuing to reach new highs, allocating some portion of a portfolio into attractive defensive investments is a good move. Defensive investments will protect the downside today, provide income today, and offer the possibility of appreciation tomorrow. Accordingly, investors need to diversify. Diversification has proven to be a critical tool for the success of an investment program. The strength and future of any investment program is its foundation.