Holding Steady: The Case for a Defensive Investment Strategy
17 August 2022
To all Financial Friends
Friend’s students who chose to broadly adopt the defensive portfolio outline given in past commentaries may still feel well positioned for future events.
The defensive strategy some months ago highlighted the following thinking:
Consider structuring your portfolio to hold: Inflation Linked Bonds. Gold and silver. FTSE 100 (on watch). Infrastructure funds. Funds focusing on Consumer Staples Stocks.
Over the past 6 months of volatility Infrastructure funds (Global +20.89%. UK+18.01%) have provided good growth and shown steadier performance than almost any other asset over the period.
Inflation linked bonds have disappointed. However just in the last month average growth of these funds has stood at 3.16%. Special interest arose at the time of Nancy Pelosi's visit to Taiwan and triggered the threat of future war with China facing up the USA.
On the 27th July inflation linked bonds rose by some 12% over 9 days while the threat seemed most imminent. As the imminent threat faded so the bonds lost some 6% of their rapid gain. The war threat (China - Taiwan - USA) is one of the main reasons for holding these bonds as they represent one of the safest holdings if the threat of increased war develops.
Gold and Silver mystifyingly continue to disappoint with losses of - 9.38% and -3.91% over 6 and 3 months respectively. As it would seem economic conditions will worsen (War, Recession and inflation) it is worth holding our breath for a sudden profitable recovery. Fear, inflation and recession are the environment in which investors turn to gold and push up the price.
The FTSE 100 index now stands at over 7500 points (highest ever level 7877 points May 2018) comfortable for those students who are monthly investors tracking the index. Kept on watch. Those with profitable holdings may consider diversifying across the defensive portfolio.
Our commentary here suggests no change to the defensive strategy already applied by some students. Except considering the addition of diversification into Consumer Staple Stocks. Shares of companies that produce the things we have to buy despite our shrinking disposable incomes. As things get tighter for families, such shares have the potential to rise even in more extreme conditions (war, drought and higher inflation levels).
Watch out for news next week as our Consumer Stocks portfolio is explained.
Equity Funds
Students who suffered big losses as equities plummeted will rejoice to see that American equities and UK equity funds have risen by 20.38% and 6.91% respectively over the last three months. Technology is up by 10.8%. Be aware of the potential for sudden equity falls again. Those with cash to invest could do well to drip feed monthly into equities as an addition to their strategy.
I have attached my post of today's date with LinkedIn. The post has already been accused of being insightful. Also it offers you The Green Investment Day coming up later in September. Enjoy!
PLEASE NOTE: A financial or economic commentary like these, are written to explain, interpret or give an opinion on economic events and markets to help readers understand what’s happening and why it matters. Designed to help you make informed decisions of your own by making you aware of opportunities, risks and potential rewards in the market.
