The Dow Jones Industrials and the S&P 500 turned in their best performances since 1998, rising 8.14% and 12.0%, respectively.
Meanwhile, the Nasdaq was even stronger, riding a tech-stock rally to a gain of nearly 19% - its best yearly start since 1991.
But as every seasoned investor knows, the markets never go straight up or straight down.
Prospects for continued strength may seem bright, but the recent five-day slide that took the Dow down almost 550 points might be pointing to something else entirely.
That's why now is the perfect time to consider shifting at least some of your funds into "defensive" stocks.
How to Shop For Defensive Stocks
The following criteria generally describe defensive stocks:- Those in non-cyclical industry groups, meaning they are capable of maintaining or increasing their revenues and earnings regardless of whether the overall economy is growing, flat or even slumping.
- Companies that provide products or services in fairly constant demand, even when the economy slows. Examples include producers of consumer staples; food packagers and distributors; healthcare and pharmaceutical companies; suppliers in certain addictive "sin" markets, such as tobacco and alcohol; and essential utilities.
- Those that have a recognizable brand name (or names) that consumers look for first, even when times are hard and cash is short.
- Stocks that pay steady - and historically increasing - dividends, which can provide both income and a cushion against short-term drops in share prices.
- Stocks with below-average volatility (beta) relative to the overall market, or a negative correlation with the primary business and/or market cycles.
- And companies that have at least some international exposure, providing access to emerging markets that offer growth even when developed nations may be struggling. (more)
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