These are shares in sectors that tend to be in demand regardless of the economic climate.

For example we all need water, electricity and gas whether we are feeling rich or poor so utility companies tend to be labelled defensive. Equally most people don’t change their smoking habits to match their income – they smoke regardless – so tobacco stocks usually go into the same category. Typically defensive stocks are not fast growers in earnings terms, and therefore tend to attract lower price to earnings ratios than their more cyclical peers subject to where we are in the business cycle.  However they are often generous dividend payers as they usually enjoy strong, steady cash flow.