Protecting Your Portfolio With Defensive Stocks

If you still want to invest in the market during shaky times like now, defensive stocks are the way to go. Defensive stocks are those that are not dependent on the overall economic cycle. Though they are not the stocks of choice to have when the economy is booming, they do outperform cyclical stocks in hard times.

By now we're all well aware of the sub prime lending crisis that spread like a disease, attacking the stock market once and once the market began to recover, more bad news. Today it has gotten worse. Wal-Mart announced that their earnings will be less than expected due to consumers tightening up on their spending. Home Depot made a similar announcement but it is understandable if not expected due to the nature of their business and the current state of the housing market. However, like any consumer knows, you can only curb your spending to a certain degree, at the end of the day, we still need food, gas, electricity, clothing (especially when there are children in the household) and a roof over our head. This is where defensive stocks come into play.

Products such as tobacco, pharmaceuticals, alcohol and utilities are not dependent on the economic cycle. Additionally, food companies that make most of their income from grocery store sales, as well as alcohol and bottled beverages are additional safe options when trying to protect your portfolio from a beaten up market.