Defensive Sector ETFs

There are several ETFs that allow investors to target baskets of stocks that are focused solely in so-called "defensive" sectors of the economy. Defensive sectors of stocks are often popular in "Bear" or falling stock markets when the economy is in Recession or even a Depression.

These Defensive sectors are generally thought to be: utility companies, pharmaceutical companies and consumer staple companies. The thinking is that even in tough and very tough economic times, people still need to buy thinks like food and toothpaste (consumer staple companies), prescription drugs (health care companies) and electricity (utility companies).

Below are lists of ETFs that target each of these 3 "defensive" stock sectors:

Consumer Staples ETFs

Everyone has to eat, but they don't have to eat in fancy restaurants. And it's a lot cheaper to stock up on groceries and do your own cooking at home.

1. The iShares S&P Global Consumer Staples (KXI) owns companies like Proctor & Gamble, Nestle, and Wal-Mart — solid basic-goods stocks. KXI has more than 45 percent of its assets in non-U.S. companies for global diversification.
2. The Consumer Staples Select Sector SPDR (XLP)
3. The Market Vectors Agribusiness (MOO) buys stocks devoted to food production and distribution.

If you're interested in pure-play agricultural ETFs, check out our list of Agricultural ETFs.

Health Care ETFs

There is no price tag on your health. People will cut back on other things before they stop spending on their family's medical needs.

1. The iShares S&P Global Health Care (IXJ) is a way to get exposure to the worldwide health care sector. IXJ has about 63 percent of its portfolio in the U.S., 13 percent in Switzerland, and 10 percent in the United Kingdom.
2. If you'd like to be more aggressive, the iShares Nasdaq Biotechnology (IBB) is how to trade the cutting-edge biotech subsector. This is where a lot of the health care growth has been concentrated in recent years.

Utility ETFs

You can adjust the thermostat and turn off a few lights, but your electric bill is still likely to be a lot of money. You can't eliminate it completely unless you live in a tent. Meanwhile, the companies that provide electricity, water, and gas have a legal monopoly in most places. Even better (for them), when their costs go up they're often allowed to pass the bill on to you through "fuel surcharges" and the like.

1. The iShares S&P Global Utilities (JXI) has 38 percent of its assets in U.S. companies, 12 percent in Germany, 10 percent in France, and 9 percent in Japan.
2. If you want a U.S.-focused utility ETF, invest in the Utilities Select Sector SPDR (XLU).
The defensive characteristics of these sector ETFs are a double-edged sword. Just as they tend to be the strongest sectors during a Recession, they also tend to be among the weakest sectors during economic boom times.


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