{"id":16095,"date":"2025-06-10T22:46:48","date_gmt":"2025-06-10T22:46:48","guid":{"rendered":"https:\/\/gaviki.com\/blog\/?p=16095"},"modified":"2025-06-10T22:46:51","modified_gmt":"2025-06-10T22:46:51","slug":"the-defensive-investor-should-never-have-less-than-25-or-more-than-75-in-common-stocks","status":"publish","type":"post","link":"https:\/\/gaviki.com\/blog\/the-defensive-investor-should-never-have-less-than-25-or-more-than-75-in-common-stocks\/","title":{"rendered":"The defensive investor should never have less than 25% or more than 75% in common stocks"},"content":{"rendered":"\n<p>The defensive investor should never have less than 25% or more than 75% in common stocks, with a consequent inverse range of between 75% and 25% in bonds. True False<\/p>\n\n\n\n<p><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-vivid-cyan-blue-color\"><strong>The correct answer and explanation is:<\/strong><\/mark><\/p>\n\n\n\n<p><strong>Correct Answer: True<\/strong><\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p>This statement is <strong>True<\/strong> and is derived directly from the investment philosophy of <strong>Benjamin Graham<\/strong>, the father of value investing, as explained in his classic book <em>&#8220;The Intelligent Investor.&#8221;<\/em> In his discussion of asset allocation for the <strong>defensive investor<\/strong>\u2014someone who seeks to avoid substantial risk and prefers a more passive investment approach\u2014Graham proposes a strategic guideline for balancing between <strong>stocks and bonds<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Graham&#8217;s Asset Allocation Strategy:<\/h3>\n\n\n\n<p>Benjamin Graham advised that the <strong>defensive investor<\/strong> should never have <strong>less than 25% or more than 75%<\/strong> of their investment portfolio in <strong>common stocks<\/strong>. Conversely, the allocation to <strong>bonds or high-grade fixed-income securities<\/strong> should also range <strong>between 25% and 75%<\/strong>, depending on market conditions. The purpose of this rule is to:<\/p>\n\n\n\n<ol class=\"wp-block-list\">\n<li><strong>Protect Against Market Volatility<\/strong>: By maintaining at least 25% in bonds, the investor cushions their portfolio against sharp downturns in the stock market.<\/li>\n\n\n\n<li><strong>Benefit from Equity Growth<\/strong>: By keeping at least 25% in stocks, the investor maintains some exposure to the long-term growth potential of equities.<\/li>\n<\/ol>\n\n\n\n<h3 class=\"wp-block-heading\">Adjusting Based on Market Conditions:<\/h3>\n\n\n\n<p>Graham encouraged investors to adjust their allocation within these ranges based on prevailing market conditions:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>When the <strong>stock market is high and overvalued<\/strong>, a defensive investor might reduce stock exposure closer to 25% and increase bond holdings to 75%.<\/li>\n\n\n\n<li>When the <strong>market is undervalued<\/strong>, they might raise stock exposure up to 75% and reduce bonds to 25%.<\/li>\n<\/ul>\n\n\n\n<h3 class=\"wp-block-heading\">Psychological Benefit:<\/h3>\n\n\n\n<p>This approach also provides a <strong>psychological anchor<\/strong>\u2014it helps investors avoid emotional decisions such as selling all stocks in a crash or going all-in during a boom. The flexible but disciplined strategy encourages <strong>buying low and selling high<\/strong> over time.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Conclusion:<\/h3>\n\n\n\n<p>Therefore, the guideline that the defensive investor should maintain between 25% and 75% in common stocks, and inversely in bonds, is <strong>True<\/strong>, and it remains a timeless principle of prudent investing.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The defensive investor should never have less than 25% or more than 75% in common stocks, with a consequent inverse range of between 75% and 25% in bonds. True False The correct answer and explanation is: Correct Answer: True Explanation: This statement is True and is derived directly from the investment philosophy of Benjamin Graham, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-16095","post","type-post","status-publish","format-standard","hentry","category-quiz-questions"],"_links":{"self":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/16095","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/comments?post=16095"}],"version-history":[{"count":1,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/16095\/revisions"}],"predecessor-version":[{"id":16096,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/posts\/16095\/revisions\/16096"}],"wp:attachment":[{"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/media?parent=16095"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/categories?post=16095"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/gaviki.com\/blog\/wp-json\/wp\/v2\/tags?post=16095"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}