Why you should buy these 2 defensive ASX shares today

Magellan Infrastructure Fund (ASX: MICH) is one of the 2 defensive ASX shares that an investor can buy today for a less volatile portfolio

| More on:
man and woman talking with each other whilst using a MacBook

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

With the S&P/ASX 200 Index (ASX: XJO) climbing dramatically this week to a new post-COVID high, it can be tempting to think these sorts of lucrative market conditions can last forever. Alas, this has never been, and will never be, the case.

The markets are a volatile beast, and can both giveth and taketh away. While some investors embrace this inherent volatility as a useful way to buy shares on the cheap, it can be downright scary, and off-putting, for many others. That's where defensive ASX shares can be useful.

There are defensive ASX shares out there that have the potential to increase the stability and decrease the volatility of one's portfolio if that's an important consideration for you. Here are two such ideas today:

iShares Global Consumer Staples ETF (ASX: IXI)

This exchange-traded fund (ETF) from iShares only invests in a basket of global companies in the consumer staples sector. Consumer staples is an investing term that describes all of the goods and services we all tend to need, rather than want. This includes food, drinks, household essentials like laundry powder, soap and dishwashing liquid, and vices like alcohol and tobacco.

The beauty of this sector is that it tends to be almost completely immune from economic conditions. We all need to eat, drink and run our houses in good times and bad. And that makes these companies extremely defensive investments. Some of this ETF's largest holdings include Coca-Cola Co (NYSE: KO), Procter & Gamble Co (NYSE: PG), Unilever plc (LON: ULVR) and McDonald's Corp (NYSE: MCD). Even our own Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) feature. 

This ETF has returned an average of 12.11% per annum over the past 10 years. It charges a management fee of 0.46% per year.

Magellan Infrastructure Fund (ASX: MICH)

This listed fund is run by Magellan Financial Group Ltd (ASX: MFG). Magellan is one of the most popular fund managers in Australia. This fund focuses entirely on infrastructure. It invests in companies with large, stable infrastructure investments like toll roads, ports, airports, energy infrastructure and power generation and transmission. Like consumer staples, demand for these assets tends to be very consistent and inelastic. That means they tend to generate cash flows in good times and bad, making them very useful defensive investments.

Magellan Infrastructure Fund holds companies like Atmos Energy Corporation (NYSE: ATO), Enbridge Inc (NYSE: ENB) and our own Transurban Group (ASX: TCL).

This defensive ASX share has returned an average of 5.81% per annum since its inception in 2016. It charges a management fee of 1.05% per year.

Sebastian Bowen owns shares of Coca-Cola, McDonalds, and Procter & Gamble. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Unilever. The Motley Fool Australia owns shares of COLESGROUP DEF SET, iShares Global Consumer Staples ETF, Transurban Group, and Woolworths Limited. The Motley Fool Australia has recommended Magellan Infrastructure Fund. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Defensive Shares

Two funeral workers with a laptop surrounded by cofins.
Defensive Shares

Down 24% this year, is this top ASX defensive share a top buy according to Macquarie?

Are investors missing a trick by avoiding this ASX share?

Read more »

A young bank customer wearing a yellow jumper smiles as she checks her bank balance on her phone.
Defensive Shares

Why Telstra shares are an appealing ASX defensive pick

Can investors call on this telco stock for resilient returns?

Read more »

A woman in a hammock on her laptop and drinking a smoothie
Defensive Shares

3 ASX shares to buy for a stress-free life

I think these businesses are attractively defensive.

Read more »

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

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

Is this the right time to invest in resilient businesses?

Read more »

Piggy bank at the end of a winding road.
Defensive Shares

Will lower interest rates boost ASX infrastruture stocks?

Let's take a look.

Read more »

Business women working from home with stock market chart showing per cent change on her laptop screen.
Defensive Shares

Forget term deposits! I'd buy these two ASX 300 shares instead

These stocks are more appealing to me than term deposits.

Read more »

Men standing together and defending the goal post symbolising defensive shares.
Defensive Shares

Why I'd buy this defensive ASX share sector right now

Defensive businesses could be the right way to play the current volatility.

Read more »

Piggybank with an army helmet and a drone next to it, symbolising a rising DroneShield share price.
Defensive Shares

The BetaShares Global Defence ETF (ARMR) is up 19% this year. Are defence stocks the new safe haven?

Defence stocks could be the new gold.

Read more »