All the signs for the new 2019 stock market course are certainly not very encouraging and indicate at least that volatility will be present in the equity markets, to a greater or lesser extent. Despite the fact that the Bankinter analysis department points out that during this new year the downward trend of the stock market will subside and their forecasts are in the sense that there will be an increase in the profitability around 5% since they believe that the selective index of Spanish equities, the Ibex 35, will reach 9.200 points by the end of the year.
In a general environment in which there is no shortage of financial analysts who are of the opinion that the stock markets are at the moment excessively penalized and it cannot be ruled out that there will be a rebound in the valuation of this important financial market. Beyond other technical considerations and maybe even from the point of view of its fundamentals. In any case, there will be no choice but to be much more cautious in the operations that must be carried out from now on.
You can not forget that also at the end of 2017 the stock market experts came to predict that the new year would be very favorable for positions in the financial markets. And it turns out that in the end it has been one of the worst years for small and medium investors. With a depreciation in the Ibex 35 that has been at very close levels at 15%. That is to say, they have failed resoundingly in their investment predictions and it leads investors to wonder if the same cannot happen in this period.
Defensive values: what are they?
One of the measures that all investors should import to take more into account the securities denominated as defensive or conservative. It is a very effective strategy to protect yourself from instabilities in equity markets. This class of securities is characterized basically because its behavior is better than the rest in the worst moments for the stock market. When the stock market rises they do not do so with such intensity, but when equities depreciate it does not do so with such violence in the fall of these values.
Another of its main hallmarks is based on the fact that they are values much less volatile that the others. In other words, the differences between their maximum and minimum prices are not so high and therefore the risks for small and medium investors are lower. Even at the risk of not being able to take advantage of the rises in the equity markets. But as we are talking about a negative scenario for the stock markets in general, it can be said that they are more interesting values to have in your portfolio. They provide more stability to it after all.
Their behavior in the markets
Defensive or conservative stocks are further distinguished by their high potential for generate savings more or less stable in the medium and long term. This is due to the fact that it usually presents a fixed, although very tiny, return every year. As a consequence of this particularity, these well-defined values are highly advisable for long periods of permanence where the aim is to create a stable savings exchange without the volatility of other companies that are listed on the stock market.
On the other hand, a good part of these values distribute dividends among its shareholders. With a fixed annual return that varies between 4% and 7% depending on the proposals selected by the users. An amount that will go to the savings account of these investors on their respective dates of payment of this remuneration. In any case, it can be used as a very original and innovative strategy to create or build a portfolio of fixed income within the variable. So that in this way, small and medium investors have a fixed income every year to meet their main expenses.
Very consolidated sectors
This class of stock securities, on the other hand, are very recognizable because they come from companies that have very traditional and above all established lines of business. They do not depend on economic cycles and provide a value that is generally demanded by a large number of citizens. As for example they can be electricity supply services or the concession of highways, among some of the most relevant. In this sense, there is no doubt that they offer greater security to small and medium investors. In contrast to so-called speculative securities that do not offer any added value.
On the other hand, it should also be noted that these proposals in the equity markets are part of the investment portfolio of some international funds or managers with the aim of developing their investment portfolios. To which to design the pension funds and in this case they acquire a greater privilege due to the stability in the prices they offer in most cases. They are a very relevant part of these financial products and in any case above that offered by the other securities that are integrated in the stock market indices around the world.
Electric sector
When speaking of these very special values, we cannot forget the electricity companies that are the defensive values par excellence. They are of great stability in the configuration of their prices and they are also the ones to pay one of the higher dividends in the financial market. With an average and annual interest that can reach up to 7%, well above that marked by all banking products. For example, fixed-term deposits, bank promissory notes or high-paying accounts. Where is going, on the other hand, a good part of the savings of bank users due to the scarcity of offers in this class of financial products.
The electricity sector is a segment very popular with small and medium-sized investors with a more conservative profile. Where the security of the investment prevails over other considerations, including the profitability of the product itself. As a consequence of this trend, the shareholding of these companies is also very stable and there is no speculation on its components. In the long term, it is always easier to make profitable savings than in other securities. Although they are not exempt from risks and depreciations in the valuation of their prices.
Other very defensive sectors
In any case, the electricity sector is not the only defensive one in the stock market. Not much less, but there are others that meet this important characteristic. Because another of the most relevant is the diet that has a better behavior in the most complex scenarios for equity markets. This is mainly due to the fact that they offer a product that is necessary for the population and therefore needs to be purchased. It is in a period of economic recession or, on the contrary, in another of expansion. Because in effect, the needs remain the same and for this reason they are very interesting for periods of great stability in the equity markets.
On the other hand, you cannot rule out the banking sector although at the cost of assuming more risk in operations. Especially in recent years as a result of its greater exposure to economic crises, as happened in the one developed between 2007 and 2008. With a better performance than in the rest of the securities that make up the main stock market indices in all the world. To the point that they have obtained very interesting returns in the last, in a range that goes from 2% and up to 10% in the best of cases. Where the food distribution companies are also integrated.
Exceptions that confirm the rule
Precisely in this last group, that of food distribution companies, is Day the worst performing security in 2018 and which was very close to trading 0,20 euros per share. Leaving in this exercise the selective index of Spanish equities, the Ibex 35 and that only a few years ago came to quote 5 or 6 euros. To crash in the price from those precise moments. This value represents an exception to the general trend of these representatives in the equity markets.
In any case, at least it will be clearer from now on what a defensive value is. You may have to resort to one of them to face a year as complex as 2019 will surely be. Where there is no doubt that you will have to be much more selective to develop a truly balanced investment portfolio to protect yourself against the fluctuations of the markets financial Which is, after all, what it is about making the savings profitable in a safer way. One of the wishes for this year that has just taken off.