Tag: defensive stocks

What are defensive stocks?

Most defensive stocks are in the Consumer sector. They benefit from continuous, habitual use and have a steady core of sales, regardless of the economy and business cycles. These companies typically make products like soap or soup—and may be considered blue chip stocks.

Defensive stocks in the Consumer sector can provide the most effective protection against recessions. That’s a key difference between Consumer stocks and companies in the Manufacturing & Industry or Resource sectors, which are far more sensitive to the ups and downs of the economic cycle.

As a general rule, Resource stocks, while not defensive stocks, provide the most effective hedge against inflation because they directly gain from rising prices of the commodities they produce.

Utility stocks used to provide a defensive hedge of sorts against economic downturns, due to their steady earnings and dividends. However, that is less true today because of changing technology and deregulation in the utility sector.

However, although it pays to be aware of these general tendencies, you should resist the temptation to fine-tune your portfolio according to theories or predictions about inflation and economic downturns. No one has ever consistently predicted either one, either in timing or degree, so most investors will want to include stocks from most if not all of the five economic sectors in a well-balanced portfolio.

At TSI Network, we recommend using our three-part Successful Investor philosophy:

  1. Invest mainly in well-established companies;
  2. Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; the Consumer sector; Finance; Utilities);
  3. Downplay or avoid stocks in the broker/media limelight.

Learn how to look for blue chip companies that are likely to pay off if business and the stock market are good, but that won’t hurt you too much during those inevitable periods when business or the markets are bad. Download Canadian Blue Chip Stocks: Bank of Nova Scotia Stock, CP Rail Stock, CN Rail Stock, Royal Bank Mutual Funds and More for FREE!

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Let value stocks add to your investment gains

March 7, 2024||ETFs

Consumer defensive companies such as Walmart, Proctor & Gamble, and Nestle provide basic goods that consumers need even during a recession. It is therefore not surprising that these companies have relatively stable revenue and profit histories and can maintain their dividends during tough economic times.
In… Read More

Mexico gains from North American trends

February 9, 2023||ETFs

The Mexican manufacturing and export sectors have already grown significantly over the past two decades. But now, despite the country’s challenges, a unique set of circumstances present Mexico with an opportunity to develop these sectors even further. That will further advance it as a major… Read More

Consumer-focused ETFs add stability

November 10, 2022||ETFs

Consumer companies such as Walmart, Kellogg and Nestle provide basic goods that consumers need, even during a recession. It is therefore not surprising that these companies have relatively consistent revenue and profit histories and are able to maintain their dividends even during tough economic times.
These… Read More

Mexico looks to recover along with the U.S.

July 15, 2021||ETFs

The Mexican economy was hit by the pandemic, especially from a disastrous drop in international tourists as COVID-19 kept visitors at home. But the economy is now recovering as the U.S. rebounds. In fact, Mexican stocks have largely bounced back to pre-pandemic levels.
Here’s a look… Read More

Consumer stocks cut cyclical risk

May 26, 2017||Dividend Stocks

Most defensive stocks are in the Consumer sector. That means they benefit from continuous, habitual use and have a steady core of sales, regardless of the economy and business cycles. Defensivestock companies typically make products such as soap, soup and beverages.
More generally,… Read More