Definition
Defensive stocks are shares of companies that provide products or services with consistent demand regardless of economic conditions. Sectors include utilities, healthcare, consumer staples (food, household products), and telecom. These companies offer stability because people need electricity, medicine, and groceries in any economy. Defensive stocks typically have lower beta, consistent dividends, and underperform during bull markets but outperform during recessions. They're often used to reduce portfolio volatility.
Example
Procter & Gamble (consumer staples) and Johnson & Johnson (healthcare) are classic defensive stocks. During the 2008-2009 recession, they fell much less than the market and continued paying dividends.
FAQ
What is Defensive Stocks?
Stocks of companies providing essential goods and services that remain stable during economic downturns.
Why is Defensive Stocks important?
Defensive Stocks helps investors evaluate industry terms and make more informed decisions.