Today marks the 7th consecutive day in which the S&P/ASX 200 Index (ASX: XJO) has fallen.
On Wednesday morning Australia's benchmark index opened at 8,671 points – roughly 0.5% down from yesterday.
This morning, I covered earlier this morning which ASX sectors may now offer opportunity for investors.
However, on the bearish side, there's no guarantee of a market recovery in the short term as the ongoing conflict in the Middle East continues to weigh on sentiment.
For those bolstering down the hatches for a prolonged share market fall, it may be worth revisiting some defensive options.
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What are defensive shares?
As a quick refresher, defensive stocks are shares in well-established, mature companies that tend to generate steady profits and pay consistent dividends
These occur regardless of the overall economic environment.
Unlike growth stocks, which usually reinvest most of their earnings to expand the business, defensive companies often distribute a larger portion of their profits to shareholders through dividends.
These companies typically operate in non-discretionary industries, meaning their products or services are always in demand, even when the economy is weak or consumer confidence declines.
Common examples include:
- consumer staples such as supermarkets and essential food producers
- healthcare providers like hospitals and pharmaceutical companies,
- food and beverage businesses
- utilities that supply electricity, gas, and water
- infrastructure companies that manage essential services like toll roads.
Defensive examples
For investors looking for individual defensive companies, some well known examples include:
- Transurban Group (ASX: TCL) – one of the world's largest toll-road operators, managing and developing urban toll-road networks in Australia and North America.
- Telstra Group Ltd (ASX: TLS) – Australia's largest and longest-running provider of telecommunications and information products and services
- Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) – Australia's largest supermarkets.
Investing in defensive shares using ASX ETFs
Another option for investors looking for more diversified defensive options is an ASX ETF.
There are several that group together high dividend or defensive themed companies into one fund.
Some options include:
- Global X Physical Gold (ASX: GOLD) – Gold is often considered a defensive option because it tends to hold its value (or rise) during periods of economic uncertainty, market volatility, or inflation.
- iShares International Equity ETFs – iShares Global Healthcare ETF (ASX: IXJ) – provides investors with the performance of the S&P Global 1200 Healthcare (Sector).
- VanEck Msci International Quality ETF (ASX: QUAL) – provides investors with an international equity portfolio of 300 companies with fundamentals that satisfy principles of quality (high ROE, stable year-on-year earnings growth and low financial leverage).
