A Stocks and Shares ISA has long been a familiar way for UK savers to invest for retirement. But lately, the mood around British shares looks uneasy. Investors withdrew a net £1.6bn from UK equity funds in July, according to the Investment Association.
Political uncertainty may have played a part, with some investors likely concerned about high prices. But I wouldn’t call the whole UK market overvalued, or pretend I know why every investor sold.
It’s worth noting that the figure measures fund flows, not the number of ISA holders selling individual shares. Still, it makes me curious: while others are stepping back, should I be looking more closely?
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Why I’m not running for the hills
I understand the appeal of cash savings and government bonds when markets feel shaky. They offer a different sort of certainty from shares, although neither makes inflation disappear. Investment trusts aren’t necessarily a safe haven either. Their share prices can fall, just like those of other listed investments.
Rather than leave individual stocks altogether, I prefer to review what I own. If my ISA is too dependent on businesses that need flagrant consumer spending or a strong economy, a more ‘boring’ company could help balance it.
That’s where defensive stocks come in. But that doesn’t mean buying any share labelled defensive. I want a business I can understand, a price that allows for setbacks and a reason to believe it can keep earning money when conditions get tougher.
With all that in mind, Tesco (LSE:TSCO) is one name on my list.
What Tesco ticks the right boxes
In the company’s latest reported trading period for its first quarter of 2026, UK food sales rose 2.6%, while online sales grew 8.9%. UK like-for-like sales, which measure store sales without counting new openings, grew 1.8%.
The supermarket giant kept its forecast for full-year group adjusted operating profit at £3bn-£3.3bn.
Aggressively growth-focused investors might miss the attraction here. The selling point is that people still need groceries when they can’t afford bigger purchases. That’s why defensive shares matter – they’re the companies that keep making money during good times and bad.
Encouragingly, Deutsche Bank has a Buy rating and a 525p target for the shares, but that’s just a forecast. At the same time, it has recently cut its forecast for Tesco’s second-quarter UK like-for-like sales growth from 2.2% to 1.7%, while keeping its profit estimate on track.
That matters because a supermarket can’t simply put prices up whenever its costs rise. It has to give shoppers value while protecting the profit it makes on sales.
The retailer’s next reported interim results are due on 8 October, so I’ll be watching sales growth, profit margins and whether its full-year guidance changes.
My ISA decision
If you’re worried about the stability of your Stocks and Shares ISA, it may be worth considering diversifying into defensive stocks like Tesco. Of course, no strategy can guarantee protection against a severe market crash, but it’s a popular method used by long-term investors.
For someone investing towards retirement, it doesn’t always pay to follow the crowd. A better plan is to check whether your mix of holdings still suits the current economic climate and your personal goals.
In this example, if your defensive shares hold steady, you’ll be better positioned to benefit and take advantage of other market opportunities than those who exited.
Should you invest £5,000 in Tesco Plc right now?
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Mark Hartley owns shares in Tesco.
This story originally appeared on Motley Fool
