why would anyone want to own a stock in difficult times or if things are getting shaky why not just go for the safety of a treasury bill which essentially has a risk free rate of return the answer is that fear and greed can often drive the markets 
defensive stocks accommodate greed by offering a higher dividend yield than can be made in low interest rate environments they also alleviate fear because they re not as risky as regular stocks it usually takes a significant catastrophe to derail their business model most investment managers have no choice but to own stocks they ll migrate toward defensive stocks if they think times are going to be harder than usual defensive stocks tend to perform better than the broader market during recessions but they often perform below the market during an expansion phase due to their low beta or market related risk defensive stocks typically have betas of less than 1 0 1consider a stock with a beta of 0 5 the stock could be expected to lose only about 1 if the market drops 2 in a week but a 2 price gain in the market for one week leads to an expected increase of just 1 for a defensive stock with a beta of 0 5 advantages of defensive stocksdefensive stocks offer the substantial benefit of similar long term gains but lower risk than other stocks they have a higher sharpe ratio as a group than the stock market has as a whole that s a strong argument that defensive stocks are objectively better investments than other stocks 2warren buffett became one of the greatest investors of all time in part by focusing on defensive stocks it s not necessary to take excessive risks to beat the market limiting losses with defensive stocks may be more effective disadvantages of defensive stockson the downside the low volatility of defensive stocks often leads to smaller gains during bull markets and a cycle of mistiming the market many investors abandon defensive stocks out of frustration with underperformance late in a bull market and this is when they need them the most investors sometimes rush into defensive stocks after a downturn in the market even though it s too late these failed attempts at market timing using defensive stocks can significantly lower the rate of return for investors examples of defensive stocksdefensive stocks are also known as noncyclical stocks because they re not highly correlated with the business cycle there are a few types of defensive stocks water gas and electric utilities are examples of defensive stocks because people need them during all phases of the business cycle utility companies also get another benefit from a slower economic environment because interest rates tend to be lower companies that produce or distribute consumer staples or goods that people tend to buy out of necessity are generally thought to be defensive they include food beverages hygiene products tobacco and certain household items consumers will find a way to buy them regardless of economic conditions these companies generate steady cash flow and predictable earnings during both strong and weak economies their stocks tend to outperform nondefensive or consumer cyclical stocks that sell discretionary products during weak economies while underperforming them in strong economies shares of major pharmaceutical companies and medical device makers have historically been considered defensive stocks there will always be sick people in need of care however they aren t as defensive as they once were due to increased competition from new drugs and uncertainty surrounding regulations apartment real estate investment trusts reits are also deemed to be defensive because people always need shelter but steer clear of reits that focus on ultra high end apartments when you re looking for defensive plays you might also want to avoid office building reits and industrial park reits that could see defaults on leases rise when business slows 