As stock markets around the work headed sharply down recently, many investors could have been forgiven for wanting to cash in their holdings. However, for those taking a long-term view, buying may well be considered a more sensible option than selling as many great companies are now cheaper to buy a part of than they were just a fortnight or so ago.
Despite the recent volatility in the markets, the FTSE 100 does offer opportunities for investors to reduce their risk and invest in shares that have more defensive, capital protecting properties.
The power you’re supplying
National Grid (LSE: NG) is one such company. The electricity and gas transmission and distribution operator which has businesses in the UK and US has had a tough time – at least as far as the share price is concerned. The share price rose to over 1,100p back in the first half of 2016 but now sits at around 825p at the time of writing.
It’s clearly not a share with good momentum – a strategy some investors like to concentrate on – but what it does offer investors is lower volatility than average. Over the long run, I believe is a big benefit. The beta – a measure of a stock’s volatility – is well below 1, showing National Grid rises and falls more slowly than the market as a whole. The dividend yield of over 5.5% and a PE ratio that’s been below 15 for quite some time also add to the stock’s defensive properties.
Black gold just keeps on giving
Royal Dutch Shell (LSE: RDSB) is another high-yielding share that can offer investors protection during times of market volatility due to a low beta. In fact, the argument can easily be made that Shell benefits from the volatility which often results in a higher oil price. This FTSE 100 giant has a market capitalisation of more than £200bn and investors keep piling into the shares.
The share price has managed to increase in value in the year-to-date, just. Given recent volatility and concerns over the future of oil, this is no small achievement. The company is more expensive than National Grid, with its shares trading at a price-to-earnings (PE) ratio of around 20, but over the last year, it has shown much better growth and share price appreciation.
Its Q2 results from July showed that Shell’s net income rose to $6.02bn for the quarter, an increase of 290% on the same period from the previous year. A rising oil price looks set to underpin positive future results which should feed into a higher share price.
Overall, I believe that having shares with a low beta score helps investors to protect their wealth. I’d argue Warren Buffett values low beta shares and when investing with a long-term view, having shares that are slow and steady are a great way to grow wealth through stock market investing.