What does defensive stock mean?

Investors who invest in the stock market know that there are many types of stocks in the stock market, such as growth, defense and so on. But many novice investors don't know much about defensive stocks. What do you mean? What are the stocks of this type?

What does defensive stock mean?

Defensive stock refers to a stock that can provide a stable return regardless of the market environment, and it is a stock with low risk and usually low return. Its profit does not decline with the economic recession, and it can effectively resist the impact of the economic recession.

Defensive stocks are aperiodic stocks, and their beta value is much lower than 1 stock, usually around 0.5. When the market rises, its performance lags behind the market, while when the market falls, its decline is much lower than that of the market, and it may even rise. Stocks with this characteristic are more suitable for investors to choose as safe-haven varieties at the end of bull market or bear market.

What defensive stocks are there?

Defensive stocks are generally in some defensive industries, such as some public utilities such as water, electricity, gas supply, transportation, food, medicine, retail and so on.

1, Consumption and Resources Unit: These stocks are stocks of alcohol, food and beverage and tourism in the sector and retail.

2. Banking sector: When inflation occurs, the central bank will take measures to raise interest rates to reduce the inflation rate, and at the same time, bank deposits will increase and bank profits will increase.

3. Medicine and agriculture: mainly stocks of biopharmaceuticals and agricultural fertilizer seeds. These are all necessities of life, which must be consumed even when the economy is bad, and then gradually improve with the continuous improvement of the economic living standard.

Because the defensive sector will not be affected by changes in the overall economy and income level, it will be reduced to a sharp decline in consumption. Usually, these industries are considered as conservative investment fields in the investment field, and the stock operation is relatively stable. When the economic cycle is relatively poor, it is usually considered as a better haven for funds.

Therefore, in a bear market, investors should allocate defensive stocks as much as possible. In a bull market, defensive stocks rose less than cyclical stocks. Investors should make portfolio investment according to their risk tolerance.