Defensive stocks are a type of investment that is known for being stable and reliable, especially during times of economic uncertainty. These stocks are typically found in industries that are considered essential, such as utilities, healthcare, and consumer staples. They are called defensive stocks because they tend to hold up well even when the overall market is experiencing volatility or downturns.
Investors turn to defensive stocks as a way to protect their portfolios from market fluctuations. While these stocks may not offer the same potential for high returns as more aggressive investments, they can provide a sense of stability and security. This is particularly appealing to those who are looking to preserve their capital and minimize risk.
Some examples of defensive stocks include companies that produce everyday necessities like food, household products, and pharmaceuticals. These companies tend to have steady revenues and strong cash flows, making them less vulnerable to economic downturns.
Overall, defensive stocks can be a valuable addition to an investment portfolio, providing a reliable anchor during times of market turbulence. By diversifying with defensive stocks, investors can help protect their assets and maintain a level of stability even in uncertain economic conditions.