We examine downside protection or defensive strategies across greater than 220 years of worldwide financial history, covering a few years through which traditional stock-bond portfolios suffer and across a big selection of economic scenarios and historical regimes. Traditional defensive equity aspects – low risk, quality and value – consistently provide effective downside protection, while gold and put options prove to be less drawdown or cheaper. Our long-term evidence shows that defensive multi-asset strategies, particularly a return-enhancing version of the strategy proposed by Cavaglia et al. introduced defensive absolute return (DAR) portfolios. (2022) and trend following provide essentially the most effective protection against downside risks. DAR and trend following complement one another in all tests by diversifying one another across drawdown phases. Investors can enhance the defensive characteristics and improve the general portfolio results of traditional portfolios by considering the detailed example evidence on defensive strategies provided on this document.
