Expert investors give advice that the best investments are the defensive ETFs as they are the safest choices regardless of the condition of the securities market. Albeit investing in defensive Exchange Traded Funds (ETFs) places priority on stability over bold and dynamic profit-yielding strategies, experts find them ideal amidst the current economic conditions.

Rationale Behind the Favorable Support for Defensive ETFs

In the past two decades, Treasury yields have been reaching levels near the highest posted in previous years. Such occurrences have caused securities in the form of stocks to struggle as a reaction to unstable market conditions. Moreover, the rising interest rates have been driving increases in raw materials and product costs that could possibly result in a recession.

Actually, many are already considering reallocating their investment portfolio to the more defensive ETF investments; although they are still seeking information on what expert investors call as “recession-proof” investments.

What Exactly are Defensive ETFs and What Makes Them Ideal as Investments?

Categorically, Defensive ETFs fall under the Non-Cyclical Investment Sector. It actually involves investing in mutual funds or ETFs that specifically place funds in recession-proof entities because such businesses are not greatly affected by economic cycles. The stock prices of recession-proof companies generally remain stable under varying phases of an economic cycle.

That is so because they are into manufacturing or providing products and services that are staple to consumers, such as basic food commodities, healthcare products and services, as well as utilities and telecommunication services and other similar commodities that consumers consider as necessities.

Mutual or defensive funds can withstand large drops in stock prices and portfolio values in times of market correction or bear market economy. They fall under the non-cyclical sector because consumers hardly spend on cyclical products and services like luxury items, financial services and other products that consumers usually save up on so they can buy one, especially when working on a tight budget.