Is this the right time to invest in ASX defensive shares?

The global stock market and the ASX share market are both experiencing significant volatility, particularly in the technology and wider ‘growth’ segments. It’s at times like this that ASX defensive shares may be viewed as attractive.

Large declines don’t happen without a reason. They are usually sparked because the market thinks the company’s future earnings power is being reduced.

In this case, it seems that many investors believe future earnings may not be as strong as previously expected.

In this case, there are heightened fears that artificial intelligence (AI) may be able to challenge existing business models, particularly ones that utilise technology to deliver their service.

So, in this circumstance, it could be an idea to look at ASX defensive shares.

Why ASX defensive shares could make sense right now

If fast-growing businesses aren’t expected to see as much profit generation, then perhaps it could be a good idea to look at names that could deliver reliable earnings. If profit can grow as expected, then this could help provide support for the share price and perhaps even enable a higher share price if investors are looking for a safe haven.

Additionally, some ASX defensive shares may be viewed as ideas for passive income. The stable earnings can also help provide stable and growing dividends from those sorts of businesses.

Which reliable businesses I’d look at

There are a few different areas of the market that I think could provide investors with underlying earnings stability over the long-term. Of course, there can be no guarantee share prices won’t be volatile in the short-term – that is just what happens with the share market occasionally.

Real estate investment trusts (REITs) are a good sector because of how they can generate resilient defensive rental income and pay distributions to investors. I’d invest in businesses like Centuria Industrial REIT (ASX: CIP), Charter Hall Long WALE REIT (ASX: CLW) and Rural Funds Group (ASX: RFF).

Businesses involved in providing essential services to their customers could be useful ASX defensive share buys. I’m thinking of names like Telstra Group Ltd (ASX: TLS), APA Group (ASX: APA) and Propel Funeral Partners Ltd (ASX: PFP).

Defensive food businesses could be smart buys – we all need to eat. I’m thinking of names like Coles Group Ltd (ASX: COL) and Rivco Australia Ltd (ASX: RIV).

Finally, diversified businesses with defensive cash flow generation could also be smart long-term choices, such as Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Wesfarmers Ltd (ASX: WES).

I think most, if not all, of the above businesses are capable of growing their earnings over the long-term, even if AI affects the tech sector.

The post Is this the right time to invest in ASX defensive shares? appeared first on The Motley Fool Australia.

More reading

• Experts name NAB and these ASX 200 shares as sells
• These buy-rated ASX dividend stocks offer 4% to 6% yields
• Forget this ASX 200 share and buy Telstra and Zip shares: Experts
• ASX 200 financials flew but tech and mining shares faltered last week
• How could I turn $500 a month into $50,000 with ASX shares?

Motley Fool contributor Tristan Harrison has positions in Propel Funeral Partners, Rural Funds Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Washington H. Soul Pattinson and Company Limited and Wesfarmers. The Motley Fool Australia has positions in and has recommended Apa Group, Rural Funds Group, Telstra Group, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.