Portfolio allocation: should I still be buying ASX defensive stocks?

Is this the right time to invest in resilient businesses?

The share market saw significant volatility in the last few weeks as investors reacted to news of US tariffs. Investors who owned ASX defensive stocks saw their portfolio outperform the broader market.

But with how the market has largely recovered in the past month, it's an interesting question of which area of the market would be best to invest in.

Is it better to invest in ASX growth shares or ASX defensive stocks today?

Ultimately, I don't think there's a wrong answer, but one could outperform the other in the coming months and years.

I'm going to give my view on those two key areas.

A woman holds her finger to the side of her face and looks upwards as she thinks about something.

Image source: Getty Images

Why ASX defensive stocks are still compelling

Without a crystal ball, it's impossible to know when the next market sell-off will occur. It could be next week, next month, next year or further away.

Owning ASX defensive stocks can provide that resilient element at all times for a portfolio. I think being able to sleep easier at night, and knowing the portfolio can deliver stability, is worth something.

I believe it makes more sense to consider ASX defensive stocks now than it did a month ago (in the middle of the sell-off).

US President Trump's tariff policies have caused a lot of uncertainty for the global share market, and at the time of writing, there are still no major agreements. A meaningful deal with China would be key, but that's not guaranteed.

I do believe defensive ASX stocks could make a wise investment for the next few years, while reducing interest rates could be a tailwind for valuations.

I'm thinking about businesses like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL), APA Group (ASX: APA), real estate investment trusts (REITs) with growing rental income, and Telstra Group Ltd (ASX: TLS), which could make solid investments today.

ASX growth shares

Over the long-term, I'd expect a faster-growing business to outperform a slower-growing business. Sometimes, it can just take time for a company to grow into its valuation.

ASX growth shares were sold off significantly during the first couple of weeks in April and that was a particularly compelling time to invest in great businesses that were trading cheaper.

With how valuations have recovered, back to March 2025 levels, the short-term sell-off prices today are not as good as they were. For example, the Pro Medicus Ltd (ASX: PME) share price has soared 35% since the low on 7 April 2025.

Depending on the business, I think some ASX growth shares can still deliver excellent returns, but I'd invest with a five-year mindset for a better chance of ensuring the investment works out. Lowering interest rates should help with business valuations.

Some of the appealing ASX growth shares that are still substantially lower than they were several weeks ago include Pinnacle Investment Management Group Ltd (ASX: PNI), Siteminder Ltd (ASX: SDR) and VanEck Morningstar Wide Moat ETF (ASX: MOAT).

In other words, I still think there are great opportunities for investors, but it'd wise to be a little more selective than a month ago, in my opinion.

Motley Fool contributor Tristan Harrison has positions in Pinnacle Investment Management Group, Pro Medicus, SiteMinder, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Pinnacle Investment Management Group, SiteMinder, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has recommended Pro Medicus. The Motley Fool Australia has positions in and has recommended Apa Group, Pinnacle Investment Management Group, SiteMinder, Telstra Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Pro Medicus and VanEck Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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