Investing during a market rally is easy but during periods of economic uncertainty things are more complicated. If you are intent on preserving your capital then you may wish to consider a tilt towards defensive investments. In this video, I look at how to do that in various scenarios and also consider which funds may provide you downside protection.
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Timestamps
00:00 Introduction
00:32 Defensive Investing
01:03 Risks
02:22 Inflation
06:11 Credit Crunch
11:31 Recession
14:32 Defensive Funds
19:47 Conclusion
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DISCLAIMER
All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results….(read more)
LEARN ABOUT: Investing During Inflation
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HOW TO INVEST IN SILVER: Silver IRA Investing
Defensive Investing: Guard Your Capital in Uncertain Times
Investing in the stock market can be a rollercoaster ride. Sometimes you will experience high returns and other times, significant losses. However, during uncertain times when the markets are volatile, it becomes even more crucial to adopt a defensive investment strategy to protect your capital.
Uncertainty can arise due to various factors such as geopolitical tensions, economic instability, or even natural disasters. These events can lead to rapid fluctuations in the stock market, making it difficult to gauge the best investment opportunities. In times like these, investors must implement defensive measures to safeguard their hard-earned money.
Here are a few defensive investing strategies to consider during uncertain times:
1. Diversification: One of the golden rules of investing is diversification. Spreading your investments across different asset classes helps reduce the risk of significant losses. Invest in a mix of stocks, bonds, cash, and even commodities to create a balanced portfolio. By diversifying, you are lessening the impact of market downturns on your overall investment.
2. Focus on Dividends: Dividend-paying stocks can provide a steady stream of income during tumultuous times. Companies that consistently pay dividends often have strong financials and stable cash flows. These stocks tend to be less volatile compared to growth stocks, making them a defensive investment option.
3. Defensive Sectors: Certain sectors often perform better than others during economic downturns. For example, utilities, healthcare, consumer staples, and telecommunications are considered defensive sectors. These industries are less affected by market fluctuations as their products and services are considered essential, regardless of the economic environment.
4. Quality over Quantity: Opt for quality stocks rather than chasing speculative investments. Look for companies with a long history of stable earnings, low debt, and a strong market position. Quality stocks generally hold up better during market downturns, making them a safer bet to protect your capital.
5. Bonds and Fixed-Income: During volatile times, investors tend to flock towards safer investments such as government bonds or high-grade corporate bonds. These fixed-income investments offer a steady income stream and are generally less volatile compared to equities. Bonds act as a hedge during market downturns, preserving your capital.
6. Have an Emergency Fund: It is essential to have an emergency fund set aside for uncertain times. This fund should ideally cover your living expenses for three to six months. By having a safety net, you can avoid dipping into your investments during emergencies, allowing you to stay invested for the long-term and ride out market fluctuations without panic-selling.
7. Regularly Review and Rebalance: Regularly review and rebalance your investment portfolio, especially during uncertain times. As market conditions change, there might be a need to reallocate your investments to ensure a balanced and diversified portfolio. Stay informed about economic trends to make informed decisions based on the current market environment.
Defensive investing is all about protecting your capital during turbulent times. By diversifying your investments, focusing on quality stocks, and having a well-balanced portfolio, you can mitigate potential losses and navigate uncertain market conditions with confidence. Remember, the key is to stay calm and systematically plan your investment strategy to achieve long-term financial goals.
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Ruffer looks very expensive 7.5% entry charge and ongoing charge 1.21% any comments Ramin?
Why hedge for inflation as opposed to investing in things that will be better when inflation is under control and interest rates are reduced?
Thanks!
Great video! The best decision I ever made in my life was investing in the crypto market. Trust me guys, it really pays a lot
dollar will be weak when intrest rates come down
@pensonCraft I note that in the Feds Stability Repot (@~7:30) REITs have very low debt levels at the moment. If there is a credit crunch, wouldn’t REITs be set to benefit with cheap realestate prices?
lets see how the gold comment holds up in the future.
Buy money market funds while rates are high. Simple.
Surprising that XLK and XLU are equally correlated to growth!
Are not times always uncertain? Surely there is no such thing as defensive or offensive investing only good (make money) or bad (loose money)?
I've watched your videos for a while now and have enjoyed them. Historically I'm an index investor mixed with a tiny bit of bonds. Just stack away and watch it grow.
I have recently learned way more about bitcoin then I ever thought I would though and it's not a joke and it's not going away. I think you need to reconsider your position on bitcoin as a new investment. I watched your very old video on 'crypto' and it was lackluster and frankly uneducated which is a deviation from what you normally do for your videos. Bitcoin is secure, it's decentralized, it's non government money and like I say it's not going away. It's not getting hacked. It's going to continue to grow and absorb Fiat money and cause problems. I recommend you give some other very smart people a listen on bitcoin and dive into it. I'm not a bot. I'm just a normal person who has discovered bitcoin as a very viable investment option. You''re smart enough where you'll get it eventually and it will click. Lyn Alden, James Lavish, Balaji, Parker Lewis, Alex Gladstein, Marty Bent, and of course Michael Saylor are good people to listen to. Give it a chance! Or at least make another video of your thoughts on Bitcoin….
How you can try and sell that ruffer dog of a fund is beyond me. I just checked on HL and itd 0% growth since sep 21 and a TER of 1.13%. Would rather burn my money. We need advice not pushing crap funds onto us all.
You ended that well. Buy and hold. Sit tight when chaos hits and you will win in the long run.
Nah. Just follow the price with trend following.
i was advised to buy physical gold and silver, which i did. ive stored gold in a deposit box and the silver at home. i used 10% of my investment fund. this is insurance, not an investment.
In a recession everything goes down. EVERYTHING.
After a period of underperformance during the Covid rally Ruffer decided to put 2.5% of assets on a Bitcoin bet. I wouldn’t invest in a fund manager that makes those kind of decisions even if the flip of the coin worked for them on that occasion.
History shows that no two recessions are the same. Personally, I'm not convinced we're heading for recession as sterling is rising making imports cheaper. But longterm the main issue appears to be demographic and a shrinking workforce in the developed world. Demand may fall because older people buy less but also supply may fall due to a labour shortage, though at different rates. And this is the ideal opportunity for AI and robotics to take up the slack. Question is whether the technology is there yet to perform intricate tasks.
There's no Protective Puts Fund made available by my pension providers. And I doubt 99% of other people have that option either. Maybe SIPPS, but just maybe. So bit of a waste of time talking about them.
Sorry I've got to crticise Ramin for his statement about buying inflation linked bonds. Some years ago he made a video about buying a fund of inflation linked bonds to protect against inflation. But he got it wrong and these funds fell sharply when inflation hit. They offered no protection. Now he advises buying a single bond. But the majority of us are dealing with funds provided by pension providers. There's no option to employ money in those pension funds to purchase a single bond. And I've yet to hear a decent explanation as to why inflaiton linked funds fell sharply. I'm told it was because of their long maturity. But that makes no sense to me because regardless of maturity, inflation hits all assets equally across the same period. Inflation on a 20 year IL bond is no different to inflation on buying 4 x 5 year IL bonds.
I disagree with Ramin over REITS. Yes, at first there is an intial shock downwards. But the supply of commercial property is fluid and supply of properties reduces significantly following the shock. Fewer builds and more abandoned properties as they become too expensive to maintain. And with new net zero regulations being implemented soon the supply of properties that meet those regulations is going to reduce further. Plus the fact REITS are now more diversified than ever before. The performance of REITS during the periods of high inflaiton in the 70's and 80's was really good. So I view REITS as a good punt.
4:07 Gold hedges monetary inflation not CPI inflation. It ran up to $2100 in August 2020 'predicting' the large M2 growth which then became a sell the news event. The M2 growth and associated gov't spending was mostly what caused CPI inflation with a 18 month lag reflecting the increase in prices that gold 'predicted' 2-3 years earlier. Few understand that gold is the leading indicator of inflation not coincident…