Elearnmarkets - Financial Market Learning
  • Categories
    • Basic Finance
    • Derivatives
      • Futures
      • Options
    • Financial Planning
    • Fundamental Analysis
    • Technical Analysis
    • Marketshala
    • Miscellaneous
  • Language
    • English
    • Hindi
    • Bengali
No Result
View All Result
  • Courses
  • Webinars
  • Stories
Elearnmarkets - Learn Stock Market, trading, investing for Free
  • Categories
    • Basic Finance
    • Derivatives
      • Futures
      • Options
    • Financial Planning
    • Fundamental Analysis
    • Technical Analysis
    • Marketshala
    • Miscellaneous
  • Language
    • English
    • Hindi
    • Bengali
No Result
View All Result
  • Courses
  • Webinars
  • Stories
Elearnmarkets - Learn Stock Market, trading, investing for Free
No Result
View All Result
Home Basic Finance
An Overview on Defensive vs Cyclical Stocks 1

An Overview on Defensive vs Cyclical Stocks

Elearnmarkets by Elearnmarkets
November 18, 2020
in Basic Finance, Capital Markets
Reading Time: 4 mins read
1
517
VIEWS
Share on FacebookShare on XShare on WhatsApp

While watching the business news channel, you might have heard experts stating terms like defensive stocks or cyclical stocks. Learn how to select defensive stocks and cyclical stocks in your portfolio by enrolling in NSE Academy Certified Equity Research Analysis course on Elearnmarkets.

But what’s the meaning of these terms and what impact they can have on your portfolio?

The impact on different sector or industry is different based on the economic scenario of the nation.

So it’s important to understand that which stocks should be part of your portfolio in different phases of your economic cycles.

Let’s understand these terms in detail-

Cyclical stocks

 Cyclical stocks are the stocks where the company’s performance is closely linked with the economy.

The share price of cyclical stocks often increases when the confidence is high in the economy and falls when the economy enters into a recession.

RelatedPosts

Top 9 Types of Trading Order 2

Top 9 Types of Trading Order

September 21, 2023
35.2k
Online Stock Market Trading: Everything You Need to Know 3

Online Stock Market Trading: Everything You Need to Know

September 20, 2023
397
How this 28-year-old became a Successful Stock Picker! 4

How this 28-year-old became a Successful Stock Picker!

September 18, 2023
979

In simple words, cyclical companies produce goods or services which are not essential to daily life and hence the consumption can be postponed in weak times.

Cyclical Stocks
Source: www.fthmb.tqn.com

For instance, cyclical businesses like travel, automobile etc are very sensitive to the economic cycles.

The reason being that during hard times, consumers are less likely to expend money on non-essential products.

Defensive stocks

 

Defensive stocks produce necessary items or services which people have to buy no matter whether the economy is going up or down.

They are very less sensitive to economic cycles because people will continue buying even in tough times.

These basically include companies like electricity, water, gas, healthcare, tobacco, etc.

Defensive Stocks
Source: www.fthmb.tqn.com

Defensive stocks offer a potential hedge to the investor even in poor economic conditions as they tend to pay regular and steady dividends.

Ideal Portfolio


Adding cyclical stocks to your portfolio would be a good idea if you are positive on the economy and wanted growth in share price rather than regular dividend income and vice versa.

A good portfolio is one which has a combination of both styles of stocks.

However, both styles have their potential merit within a portfolio and the percentage allocation in them largely depends on your view of the market, risk and money requirement.

Since it’s very difficult to predict future, investing in both defensive and cyclical stocks make sense as it reduces the risk element for investors and offers protection both in good and bad economic phase.

You can also read Growth Stocks vs Value Stocks to get an insight on the method of stock picking.

Bottomline


An investor should preferably conduct a top-down approach so as to identify the economic cycle and anticipate its impact on the stock market.

Understanding the concept of cyclicality helps in deciding that how to make use of different economic cycles.

A smart investor should first analyze the economy and accordingly diversify their holding in defensive or cyclical stocks.

Take care and keep learning!!

 

Tags: defensive and cyclical stocksenglishinvestment basicsstockstock market
ShareTweetSend
Get Kotak Offer Get Kotak Offer Get Kotak Offer
Previous Post

Growth vs Value stock

Next Post

Blue Chip Stocks

Elearnmarkets

Elearnmarkets

Elearnmarkets (ELM) is a complete financial market portal where the market experts have taken the onus to spread financial education. ELM constantly experiments with new education methodologies and technologies to make financial education effective, affordable and accessible to all. You can connect with us on Twitter @elearnmarkets.

Related Posts

Top 9 Types of Trading Order 5
Basic Finance

Top 9 Types of Trading Order

September 21, 2023
35.2k
Online Stock Market Trading: Everything You Need to Know 6
Basic Finance

Online Stock Market Trading: Everything You Need to Know

September 20, 2023
397
How this 28-year-old became a Successful Stock Picker! 7
Capital Markets

How this 28-year-old became a Successful Stock Picker!

September 18, 2023
979
Exploring Arbitrage Trading in India: How Does it Work & Strategies 8
Basic Finance

Exploring Arbitrage Trading in India: How Does it Work & Strategies

September 13, 2023
1.6k

Comments 1

  1. frolep rotrem says:
    4 years ago

    You have observed very interesting points! ps decent internet site.

    Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Elearnmarkets Logo

Follow Us

Facebook-f Twitter Instagram Linkedin-in Youtube Telegram

Register on Elearnmarkets

Continue your financial learning by creating your own account on Elearnmarkets.com

Register Free Account

Download App

Playstore logo
Download on app store

Categories

  • Basic Finance
  • Derivatives
  • Financial Planning
  • Fundamental Analysis
  • Technical Analysis
  • Marketshala
  • Miscellaneous

Popular On Elearnmarkets

  • Market Superheroes:
  • Vivek Bajaj
  • Chetan Panchamia
  • Ashish Kyal
  • Premal Parekh
  • Abhijit Paul
  • Jegan
  • Sivakumar Jayachadran
  • Vishal Malkan
  • Jyoti Budhia
  • Vivek Gadodia
  • Vishal Mehta
  • Piyush Chaudhry
  • Santosh Pasi
  • Gomathi Shankar
  • Market Superheroes:
  • Vivek Bajaj
  • Chetan Panchamia
  • Ashish Kyal
  • Premal Parekh
  • Abhijit Paul
  • Jegan
  • Sivakumar Jayachadran
  • Vishal Malkan
  • Jyoti Budhia
  • Vivek Gadodia
  • Vishal Mehta
  • Piyush Chaudhry
  • Santosh Pasi
  • Gomathi Shankar
  • Courses:​
  • Options Trading
  • Dow Theory
  • Momentum Trading
  • Stock Investing
  • Stock Market for Beginners
  • Harmonic Chart Patterns
  • Algo Trading
  • Elliot Wave Theory
  • Advanced Excel
  • Cryptocurrency
  • NSE Certification Course
  • Courses:​
  • Options Trading
  • Dow Theory
  • Momentum Trading
  • Stock Investing
  • Stock Market for Beginners
  • Harmonic Chart Patterns
  • Algo Trading
  • Elliot Wave Theory
  • Advanced Excel
  • Cryptocurrency
  • NSE Certification Course
  • Webinars:
  • Bank Nifty Scalping
  • Intraday Trading Strategies
  • Options Trading Strategies
  • Options selling
  • Price Action
  • Relative Strength
  • Tax Planning
  • Options Buying
  • Growth Stocks
  • Portfolio Management
  • Relative Strength Index
  • Risk Management
  • Renko Charts
  • Crude Oil
  • Traders Psychology
  • Moving Average
  • Multibagger Stocks
  • Webinars:
  • Bank Nifty Scalping
  • Intraday Trading Strategies
  • Options Trading Strategies
  • Options selling
  • Price Action
  • Relative Strength
  • Tax Planning
  • Options Buying
  • Growth Stocks
  • Portfolio Management
  • Relative Strength Index
  • Risk Management
  • Renko Charts
  • Crude Oil
  • Traders Psychology
  • Moving Average
  • Multibagger Stocks
  • Free Learning Modules:
  • Intraday Trading
  • Options Scalping
  • Swing Trading
  • Financial Modelling
  • RSI Indicator
  • Bollinger Bands
  • Pricing of Futures
  • Personal Finance
  • Initial Public Offerings (IPO)
  • Value Investing
  • Technical Indicators
  • Candlesticks
  • Chart Patterns
  • Option Greeks
  • ELSS Funds
  • Banking and Insurance
  • Real Estate
  • Gold
  • Free Learning Modules:
  • Intraday Trading
  • Options Scalping
  • Swing Trading
  • Financial Modelling
  • RSI Indicator
  • Bollinger Bands
  • Pricing of Futures
  • Personal Finance
  • Initial Public Offerings (IPO)
  • Value Investing
  • Technical Indicators
  • Candlesticks
  • Chart Patterns
  • Option Greeks
  • ELSS Funds
  • Banking and Insurance
  • Real Estate
  • Gold
  • Book Summaries:
  • Rich Dad Poor Dad
  • Psychology of Money
  • The Intelligent Investor
  • The Richest Man in Babylon
  • Think and Trade Like a Champion
  • Value Investing and Behavioural Finance
  • Trading in the Zone
  • Learn to Earn
  • Book Summaries:
  • Rich Dad Poor Dad
  • Psychology of Money
  • The Intelligent Investor
  • The Richest Man in Babylon
  • Think and Trade Like a Champion
  • Value Investing and Behavioural Finance
  • Trading in the Zone
  • Learn to Earn
  • Tools:
  • CAGR Calculator
  • SIP Calculator
  • eLearnOptions
  • Future Value Calculator
  • Present Value Calculator
  • Atal Pension Yojana
  • Cost of Delay Calculator
  • Become a Crorepati
  • Tools:
  • CAGR Calculator
  • SIP Calculator
  • eLearnOptions
  • Future Value Calculator
  • Present Value Calculator
  • Atal Pension Yojana
  • Cost of Delay Calculator
  • Become a Crorepati

© 2023 Elearnmarkets. All Rights Reserved

  • Visit Elearnmarkets
  • Courses
  • Webinars
  • Financial Guides
  • Get Free Counselling
  • Visit Elearnmarkets
  • Courses
  • Webinars
  • Financial Guides
  • Get Free Counselling

Get Elearnmarkets App

No Result
View All Result
  • Article Categories
    • Basic Finance
    • Derivatives
    • Financial Planning
    • Fundamental Analysis
    • Technical Analysis
    • Marketshala
    • Miscellaneous
  • Language
    • Hindi
    • Bengali
    • English
  • Courses
  • Webinars
  • Stories

© 2020 Elearnmarkets All Rights Reserved

Guide Book on Investing with ₹ 5000
Learn about the Basics of Investments and Finance in this Ebook.
Download Now
View Course Details
View Course Details