Don't Fall For The 'Defensive Portfolio' Hype

As the stock market has stalled and moved sideways since mid-February, with economic and inflationary worries increasing, Wall Street is beginning to put out advice on how to prepare for a potential market correction. The advice has always been the same. You've heard it before. No matter what happens to the economy people will still have to eat, drink, and take their medicines. So food, beverage, healthcare, and drug companies will continue to do well even in an economic and market downturn. And large solid companies, particularly utilities, which pay high dividends that will help offset any decline in their stock prices, will also provide protection for portfolios. But before you rush out to buy Coca Cola (KO), Kraft Foods (KFT), Proctor & Gamble (PG), Sara Lee (SLE), Merck (MRK), Bristol Myers Squibb (BMY), or high dividend paying utilities like PPL Energy (PPL) or DTE Energy (DTE), be aware that while consumers will have to continue to eat, drink, and take their medicines, continuing to buy the products of those companies, in a market decline investors do not continue to value the earnings of those companies as highly as during an exciting bull market. Continue reading the article.