Counter a Volatile Market With Some Defensive Investments

A volatile market continues to wreak havoc for some investors. This has caused some to take a pause and grab profits. Those investors are now turning in increasing numbers to some more defensively-focused investments.

Fortunately, there are more than a few ideal investments on the market that offer a defensive moat. Here are a few to consider for your portfolio

Precious metals are a great place to start

During times of volatility, investors have turned to precious metals for the defensive moat they offer. It’s no surprise then, that gold prices have shot up over US$100 per ounce this year.

But what precious metal stock can counter a volatile market? Wheaton Precious Metals (TSX: WPM)(NYSE: WPM) is an intriguing option to consider. In fact, Wheaton isn’t even a miner, but rather a streamer, which plays into why the stock is such a good investment.

Streamers don’t own or manage any mines. Instead, streamers such as Wheaton provide upfront financing to traditional miners to begin operations. In exchange for that capital injection, streamers are permitted to purchase metals produced from the mine at highly discounted rates.

Those metals can then be saved or sold on at the market rate. In terms of that discount, it can be as little as US$400 per ounce of gold and US$4.50 per ounce of silver.

By way of comparison, an ounce of gold and silver are currently trading at just over US$1,930 and US$25, respectively. That lower-risk business model also allows Wheaton to flex its muscle and expand quickly to multiple mines. Wheaton currently boasts 24 active mines on three continents. The company also has a further 8 mines in development.

If that’s not enough, Wheaton also offers a quarterly dividend to investors. The current yield on that dividend works out to a respectable 1.32%.

In other words, Wheaton is a great defensive investment to hold that can offset a volatile market.

This stock carries an entire continent worth of goods

It would be hard to mention a list of stocks to help offset volatility without mentioning Canadian National Railway (TSX: CNR)(NYSE: CNI). Canada’s largest railroad is one of the most defensive stocks on the market, and for good reason too!

Canadian National hauls everything from chemicals and automotive components to raw materials, precious metals, crude, and wheat across its vast network. That network stretches over 32,000 kilometres, stretching coast-to-coast and down through the U.S. Midwest to the Gulf coast.

In fact, Canadian National is the only railroad on the continent that connects to three separate coastlines. Along one of those coastlines, Canadian National also has exclusive access to the closest port to Asia via the port of Prince Rupert. That network connects to nearly every major metro area on the continent, hauling a whopping US$250 billion of goods each year.

It’s no wonder that Canadian National’s rail network is often referred to as part of an arterial vein of the entire North American economy.

As impressive as that sounds, there’s still more defensive appeal to consider. Those rail networks were built up in some cases several decades ago. Since then, entire communities have emerged on either side of those tracks. To even consider a competitor that could emerge to counter Canadian National’s network would be near impossible.

In short, it would take a decade or more of construction and cost tens of billions. That makes Canadian National the ultimate defensive stock to own.

Oh, and let’s not forget that Canadian National also offers a quarterly dividend that earns a juicy 1.93% yield. In short, this is one stock you want to buy now and hold forever.

You can counter a volatile market

No investment is without risk. That’s especially true now given the volatile market we have. Fortunately, both Wheaton and Canadian National are great long-term investments that can offer growth and income potential in defensive packages.

In my opinion, one or both should be part of your long-term portfolio.