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What's Downside protection?
Active management metrics explained
Downside protection on investment occurs when techniques are employed to mitigate or prevent a decrease in the value of the investment. Downside protection is a common objective for investors and fund managers to avoid losses, and several instruments or methods can be used to achieve this goal.
KEY TAKEAWAYS
- Downside protection is meant to provide a safety net if an investment starts to fall in value.
- Protection from losses can also be achieved through diversification or stop-loss orders.
- Protecting an entire portfolio from losses may not make sense depending on how much the protection costs and when the investments are expected to be cashed in.
Last modified 7mo ago
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