How to choose defensive assets? Let's talk about the "Dividend+" portfolio.

Since March, due to the ongoing impact of geopolitical conflicts, the market has been volatile, with fluctuations intensifying. This week, the major indices even briefly fell below 3,800 points. In the face of a high-volatility market environment, “defense” has become a major demand for current asset allocation. Dividend, low-volatility dividends, free cash flow, and Value 100 indices have once again become the focus of capital.

Faced with various value indices, many friends are puzzled: they are all defensive, how should one buy them? Today, let’s briefly discuss the differences among the four representative value indices — dividend, low-volatility dividends, free cash flow, and Value 100 — from three dimensions: stock selection logic, risk characteristics, and fitting scenarios.

1. Defense = Value? What is “Dividend+”?

First, let’s talk about a small consensus in everyone’s mind: why does “defense” naturally bring to mind “value” investing? What are value indices? — The core of value investing is to set aside short-term speculation and focus on stock selection based on the fundamentals of a company. Value indices refer to a bundle of stocks screened based on the ratios of financial indicators reflecting a company’s fundamentals — such as net profit, free cash flow, and dividends — to stock prices, selecting stocks that are underpinned by fundamentals, avoiding hot trends and speculative concepts, and relying on the intrinsic value of the companies for market movements. Their performance is often more stable compared to growth stocks, which is why they are commonly associated with defensiveness.

Figure: Common Value Stock Selection Indicators

The CSI Dividend Index (000922) is the “old money” among value indices, focusing on the 100 leading companies with stable dividends and the highest dividend yield in the Shanghai and Shenzhen markets. It primarily looks at the strength of dividends and is the most well-known value strategy. It tends to be pro-cyclical, covering industries such as banking, coal, and transportation in a balanced manner, with valuations at low levels and outstanding dividend returns, emphasizing a long-term stable income. In a bear market, its dividend yield can partially hedge against market declines, demonstrating good downside protection, but it has weaker elasticity in a bull market.

With the rapid development of domestic index investing, more indicators reflecting corporate value have been incorporated into the stock selection system, leading to the emergence of diversified value indices. More affectionately, we refer to these value indices as “Dividend+” indices.

2. Overview of “Dividend+” Combinations, Each Emphasizing Different Aspects

The CSI Low Volatility Dividend Index (H30269) is the “defensive faction” among “Dividend+”. It builds on high dividends with an additional low volatility screening, retaining only 50 stocks with stable dividends and the lowest price fluctuations, with nearly 50% coming from banks. Compared to the CSI Dividend Index, its valuation and dividend yield levels are comparable, while its volatility and drawdown are further reduced, making it suitable for investors whose core investment demand is risk aversion.

The National Free Cash Flow Index (980092) is the “offensive faction” among “Dividend+”. Compared to dividends, it focuses more on the sources of stable dividends, namely the companies’ free cash flow — screening the 100 stocks with the highest free cash flow rates, emphasizing the companies’ real “blood-making ability,” which can effectively avoid the pitfalls of “borrowing to pay dividends or selling assets to pay dividends.” Its long-term returns are significantly higher than traditional dividend indices, but its volatility and drawdown are also relatively larger. It is an optimal choice for gaining certain yield elasticity while maintaining defense, with quarterly adjustments.

The National Value 100 Index (980081) is the “balanced faction” among “Dividend+”. It integrates low valuation, high dividend yields, and high free cash flow rates through three-dimensional screening and cross-validation, also with quarterly adjustments. It is more flexible than traditional dividends and more stable than free cash flow, with volatility and returns lying between the two, and controllable drawdowns. It performs particularly well in volatile markets, making it suitable for the vast majority of market environments.

Figure: Latest Industry Distribution of “Dividend+” Indices

Note: Data source Wind, as of 2026/2/27

Figure: “Dividend+” Index Return Characteristics

Figure: Annual Return Performance of “Dividend+” Indices

Note: Data source Wind, 2012/12/31~2026/3/20, using total return indices.

In summary, based on the premise of defense: CSI Dividend = stable income; Low Volatility Dividend = defensive choice; Free Cash Flow = elastic supplement; Value 100 = balanced pursuit of growth.

3. Adaptability is Key, Choose According to Needs

Understanding the core characteristics of the four “Dividend+” indices, I believe everyone has felt that as standardized investment tools, these indices each have their strengths. There is no absolute good or bad, only whether they fit — being able to effectively use these tools in conjunction with market environments and personal allocation needs to craft your optimal solution is the key.

If you simply want pure risk aversion and drawdown resistance, consider prioritizing Low Volatility Dividends, which can smooth account fluctuations to the greatest extent due to its extreme low volatility attributes. You can also pair it with the CSI Dividend and Value 100 for support, ensuring steady cash flow through triple high dividends while diversifying the high concentration of Low Volatility Dividends in the banking sector. Value 100 can add some flexibility to the portfolio, making it particularly suitable for periods of prolonged market declines and frequent black swan events.

If you want to advance steadily without chasing highs or falling into traps, the National Value 100 might be the optimal solution. Its multi-factor balanced stock selection logic allows it to earn some returns through valuation recovery in sideways markets with unclear directions, while having dividends to support the underlying assets. Whether configured alone or in combination with some dividends or free cash flow based on whether you lean towards defense or offense, it is appropriate.

If you can tolerate slight fluctuations and want to gain yield elasticity while defending against risks, you might choose the Free Cash Flow Index. Its focus on the real profitability of companies can show elastic advantages compared to other “Dividend+” indices during market stabilization and early recovery. Pairing it with a small amount of Low Volatility Dividends can help balance drawdowns appropriately.

This discussion of “Dividend+” combinations is merely a starting point; there are indeed more configurations for everyone to explore. Interested investors can track the ETFs and their associated funds for the above indices to build their defensive assets: