What is capital preservation?

Capital preservation is a key investment strategy that focuses on protecting an investor's initial investment or capital. The primary goal of capital preservation is to safeguard the principal amount of the investment, and the strategy typically involves investing in low-risk securities such as treasury bonds, certificates of deposit (CDs), or money market funds.

Investors who prioritize capital preservation are usually more concerned with protecting their money from potential losses, rather than maximizing returns. This strategy is commonly used by conservative investors who are near retirement or want to maintain a stable financial position.

While capital preservation may offer lower returns compared to riskier investment strategies, it provides a certain level of security and stability for investors. By preserving their capital, investors can ensure that their initial investment remains intact, even during market downturns or economic uncertainties.

Overall, capital preservation is a defensive investment strategy that prioritizes protecting the principal amount of an investment over pursuing higher returns. It can help investors avoid significant losses and maintain a more stable financial position over the long term.