Asked by: Weiwei Rosskopfpersonal finance mutual funds
What is a defensive industry?
Last Updated: 18th June, 2020
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Similarly one may ask, what is a defensive sector?
When the economy is getting weaker, many investors begin to pad their portfolios with defensive sector funds. Because these funds can perform better than the broader market during recession or a bear market, they are referred to as "defensive." Examples of defensive sectors include healthcare and consumer staples.
One may also ask, are industrials defensive? Companies in the utility industry, for example, are defensive because consumer demand does not decline as much during downturns. Consumers need electricity, water, heating, and air conditioning, whether the economy is in a recession or not. The other primary defensive industries are consumer staples and healthcare.
Secondly, what is an example of a defensive stock?
Water, gas, and electric utilities are an example of defensive stocks because people need them during all phases of the business cycle. Utility companies also are thought of as benefiting from slower economic environments because interest rates tend to be lower and their competition to borrow funds is much less.
Why is healthcare a defensive sector?
Defensive plays, such as health care, are considered safer bets in a shrinking economic environment where demand for their goods and services are less affected. Health care, alongside other defensive sectors such as utilities and REITs, typically offer a dividend and consistent growth.