What is the primary focus of "capital preservation"?

The primary focus of capital preservation is to safeguard the original investment from loss. This investment strategy prioritizes maintaining the value of the initial capital rather than seeking high returns. Investors who adopt this approach usually favor low-risk options, such as cash equivalents, government bonds, or other fixed-income investments, which are less likely to fluctuate significantly in value.

By concentrating on preserving capital, investors aim to ensure that the amount they have invested remains intact over time, thereby protecting against market volatility and potential losses. This strategy is particularly appealing to conservative investors or those nearing retirement who depend on having their principal investment preserved for future needs.

Other strategies, such as maximizing profits, usually involve a greater willingness to take on risk, which can jeopardize the original capital. Similarly, diversifying across multiple asset classes or investing in high-risk securities aligns more with growth-oriented approaches rather than focusing strictly on preserving the initial investment.