The Pros and Cons For Defensive Stocks

Have you ever heard of defensive stocks? It pays to take more notice of them, especially in times which are hard and normal stocks are tending to fall in value. These stocks are defensive because they have the ability to withstand hard times much more easily than other stocks which can be more vulnerable. A good example of a defensive stock is a utility, because this is something we all need regardless of what the economy might be doing.

Of course these stocks have pros and cons just like any other stock, so it pays to know more about them before deciding how to proceed. One of the main advantages is that if you invest in defensive stocks you are less likely to be affected by what happens in a recession. They may go down marginally in value but it isn’t likely to be by much.

Conversely they can also fail to appreciate much in value because they are so steady. If you are looking to make a healthy profit on the stock market, defensive stocks are not the best things to invest in because of this. They are unlikely to go up much in value.

But again they are the safe haven to which many investors flock in hard times. When businesses are going under because of difficult economic conditions you don’t want to be holding stock in any of them. By investing in defensive stocks you can be reasonably sure your investment will be safe.

As such they provide a distinct advantage when you want to make money from your investments in recessionary times. Some people invest in other stocks while times are good, and then move their money over to defensive stocks when the economy is going through a recession. This makes sense as such stocks will often provide a much better return for you at this time.

The main thing to remember is that you need to be aware of when to move your stocks to gain the best advantage from them. Some people like to invest in defensive stocks as part of their overall portfolio. They may not offer huge returns but their stability is a good thing to bear in mind. Knowing that they are very unlikely to suddenly depreciate in value is enough to persuade some people to make them a key part of their overall portfolio.



Source by Ben Lardes

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