Defensive Investment Strategies for 2009

By Rudy Martin | Oct. 13, 2008

What everyone knows is that it was a historically bad week for stocks world-wide. It got so bad that at the start of Friday, traders clapped as the Dow Industrial index broke down below 8,000. Traders hope this marks a bottom for the current downward stock price spiral. Some savvy investors also played this downturn and made millions.

So not everyone was a loser last week!

The potential for significant returns by taking a position on market direction is huge. The opportunities to do so also come and go quickly. Just last week if you had invested in one of the exchange-traded fund I recommended you could have made 23% in just five days versus a 27% loss from other Latin American ETFs. That’s a real 50% spread in returns on a year-to-date basis.

Please excuse this shameless plug for the October edition of Latin Stock Investing – now also available at newsletters.forbes.com. When I put together the defensive multi-ETF portfolio in the newsletter, I highlighted a strategy to minimize downside risk in a volatile market.

Another approach that seems to be working is dividend investing. The LSI Dividend portfolio was down only 10% last week, versus a 15% decline for the LSI Growth portfolio. Granted there are great dividend buys in all the major markets if you know where to find them. But it’s always a positive to see a strategic concept reinforced with market results.

Readers that have been following what is going on in Resource-rich Latin America, especially booming Brazil, know the economic fundamentals are solid. It’s just a matter of time before these differences against the slower American and European growth are recognized – in the meantime it pays to be defensive via ETF strategies and dividend investing.