{"id":420579,"date":"2022-01-14T14:48:21","date_gmt":"2022-01-14T14:48:21","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?page_id=420579"},"modified":"2025-04-15T09:28:58","modified_gmt":"2025-04-15T08:28:58","slug":"defensive-stocks","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/share-trading\/invest-in\/defensive-stocks","title":{"rendered":"Invest in defensive stocks"},"content":{"rendered":"

By its very nature, stock market investing is both volatile and risky. While investors want their holdings all to grow, market turbulence can quickly throw plans off course and it is for this eventuality that many turn to defensive stocks to provide an element of protection.<\/p>

After the global financial crisis in 2008-09, stock markets enjoyed more than a decade-long bull market<\/a>, with growth stocks producing huge returns. However good things can\u2019t always last and in the event of a downturn, like the one seen at the outset of the Covid pandemic, these same stocks may be more susceptible. <\/p>

In circumstances such as this, defensive stocks \u2013 namely companies that sell vital goods and services, have reliable earnings and, where possible, pay dividends<\/a> \u2013 tend to hold their value better.<\/p>

What are defensive stocks?<\/h3>

Not to be confused with defence stocks, which are the stocks of companies that manufacture things like weapons, ammunition, and fighter jets, defensive stocks tend to be more stable through a market cycle because there is constant demand for the business\u2019 goods and services. The caveat with being lower risk<\/a>, is that during bull markets, returns can often lag higher growth peers.<\/p>

Given that they don\u2019t rely on the timing of the market cycle for growth, defensive stocks are also known as non-cyclical stocks, and they can be found in multiple sectors of the market. The main areas are Utilities (water, electric, gas and broadband suppliers), Consumer Staples and Healthcare. In all market conditions, people need to go to the shops and buy staples such as food, drinks and tobacco, while the need for healthcare and pharmaceuticals also does not subside, as people will always be sick and in need of care.<\/p>

Additionally, many investors now also consider areas of technology essential spending, meaning you could therefore assume these will be the new classic defensive sectors of the future.<\/p>

UK defensive stocks<\/h3>

We have some great defensive companies here in the UK. If you\u2019re not familiar with the companies, you\u2019ll probably be familiar with some of the brands that they own, which we\u2019ll detail more below. <\/p>

\"Diageo<\/div>

Diageo<\/h4>

Diageo<\/a> is one of the names you might not<\/i> be familiar with, but you\u2019ll certainly be familiar with some of its underlying brands \u2013 including Guinness<\/a>, Smirnoff, Bailey\u2019s, Pimm\u2019s and Tanqueray, among many others. <\/p>

It is listed on both the London Stock Exchange<\/a> and the New York Stock Exchange<\/a> and is part of the FTSE 100<\/a>.<\/p><\/div><\/div>

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Buy Diageo shares<\/a><\/p>

\"Astrazeneca<\/div>

AstraZeneca<\/h4>

If you\u2019ve recently had one of your coronavirus vaccines, whether it\u2019s a first dose, a second dose or a booster shot, you may have had the AstraZeneca<\/a> coronavirus vaccine. For a lot of people, this was the first time they\u2019d heard of this company, but it\u2019s a longstanding company with a history dating back more than a century. AstraZeneca has products used to help diseases in oncology, the cardiovascular system, the gastrointestinal system, neuroscience and the respiratory system. <\/p>

The stock is listed on the London Stock Exchange, NASDAQ OMX Stockholm, NASDAQ New York, the Bombay Stock Exchange <\/a>and the National Stock Exchange of India. AstraZeneca is part of the FTSE 100 index.<\/p><\/div><\/div>

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Buy Astrazeneca shares<\/a><\/p>

\"British<\/div>

British American Tobacco<\/h4>

DAt the opposite end of the health scale to Astrazeneca sits British American Tobacco (BAT)<\/a>. BAT has long been a popular UK defensive stock and it has been one of the highest yielding stocks on the FTSE 100 for years, as the addictive nature of nicotine means demand for its products stays stable regardless of the economic situation. Of course, there\u2019s an ethical factor when it comes to investing, and some may be uncomfortable including the stock in their portfolios.<\/p>

BAT sits in the FTSE 100 and its primary listing is on the London Stock Exchange. It has secondary listings on the New York Stock Exchange and the Johannesburg Stock Exchange.<\/p><\/div><\/div>

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Buy British American Tobacco shares<\/a><\/p>

Investing in global defensive stocks from the UK<\/h3>

There are defensive companies all over the world, so you don\u2019t have to stick with stocks closer to home if you don\u2019t want to. Investing in some global stocks means that you can diversify your portfolio, but you can also encounter foreign exchange fees and fluctuations<\/a>. <\/p>

\"Microsoft<\/div>

Microsoft<\/h3>

One of the largest stocks in the S&P 500, Microsoft is a household name. The hardware and software company is best known for its Windows operating system, the Microsoft Office suite of programs, and the Xbox game system. The company also is a major player in cloud computing services, with its cloud platform, Azure.<\/p>

Microsoft<\/a> is listed on the NASDAQ and is a component of the NASDAQ-100, S&P 100, S&P 500<\/a> and Dow Jones Industrial Average<\/a>.<\/p><\/div><\/div>

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Buy Microsoft shares<\/a><\/p>

\"Nestle<\/div>

Nestle<\/h3>

Measured by its revenue and other metrics, Nestle is currently the largest food company in the world. Based in Switzerland, the multinational food and drinks conglomerate was founded in 1866 by Henri Nestl\u00e9 and its product portfolio includes brands such as Nespresso, Smarties, Kit Kat, Stouffer\u2019s, and Nesquik. A company with over $95bn in sales, the consumer staple has constantly risen its dividend over the last decade.<\/p>

Nestle is listed on the SIX Swiss Exchange.<\/p><\/div><\/div>

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Buy Nestle shares<\/a><\/p>

\"LVMH<\/div>

LVMH<\/h3>

Owning several of the world\u2019s best-known high-end brands in jewellery, spirits, fashion, and more, Moet Hennessy Louis Vuitton (LVMH) fits the bill when it comes to a true recession proof stock. High-end luxury companies like LVMH generally thrive during market downturns because their more affluent customers struggle less during economic downturns. <\/p>

LVMH is listed on the Euronext<\/a> Paris Eurolist.<\/p><\/div><\/div>

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Buy LVMH shares<\/a><\/p>

Why invest in defensive stocks?<\/h3>

Over time defensive stocks have been able to deliver similar long-term gains \u2013 with lower levels of risk \u2013 than the broader market. However, there could be long periods of underperformance when the style is out of favour. Allocations to defensive stocks are typically made when investors are looking to protect portfolios<\/a> when the economy is showing signs of weakness or the stock market is experiencing elevated levels of volatility. <\/p>

At the same time, defensive stocks are often well-established companies, with a long history of stock market earnings and dividends<\/a>. As a result, so they are often of interest to dividend investors, or to anyone looking to find long-term gains with lower risk investments<\/a>.<\/p>

How to invest in defensive stocks<\/h3>
  1. Choose stocks to invest in.<\/strong> You can check out some defensive stocks above<\/a> and find out more about them.<\/li>
  2. Choose an investment platform.<\/strong> You\u2019ll need one that lets you invest in the stock exchange that your chosen stocks are listed on. Have a look at our table to compare the share-dealing platforms<\/a>.<\/li>
  3. Sign up and fund your account.<\/strong> You might need to wait for your account to be verified and for your funds to hit the account before you can begin.<\/li>
  4. Find your chosen stock.<\/strong> You can search its name or ticker.<\/li>
  5. Review and buy.<\/strong> It\u2019s as easy as that!<\/li><\/ol>

    Our top picks for where to buy shares<\/h4>\n\n\n\n\n