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How to invest in defensive stocks in Canada

Best Defensive Stocks: Best Recession-Proof Investments in Canada

Noel Moffatt

By Noel Moffatt

🗓️

Updated: March 06, 2025

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Recession! Volatility! Risk!

Three of the scariest words for investors, especially those who lean more conservative. But, what if you could invest in a (slightly more) recession-proof way, while managing volatility and risk?

Enter: Defensive stocks, otherwise known as non-cyclical stocks.

The Cole’s Notes on these investments are that they tend to be less affected by economic cycles and are therefore considered relatively stable. Let’s dig in to see if you should be adding some Canadian defensive stocks to your portfolio. 

Related read: Best defence stocks

Best defensive stocks in Canada

Let’s look at some stocks that are considered some of the best defensive stocks in Canada.

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How to buy defensive stocks in Canada

The first thing you’ll need before investing in defensive Canadian stocks is a stock trading account. You can get one of these with any of the big banks or fintech trading companies, such as Questrade or Wealthsimple. You’ll then want to fund your account with cash so that you have money to purchase stocks. This is the easy part.

Questrade Wealthsimple Qtrade
Questrade Wealthsimple Qtrade
◦ Account maintenance fees: $0 per year
◦ Trading commission: $4.95 – $9.95 + Free ETF purchases 		◦ Account maintenance fees: $0 per year
◦ Trading commission: $0 commission on stocks and ETFs 		◦ Account maintenance fees: $100 per year (waived with $25,000 balance or two trades per quarter)
◦ Trading commission: $8.75 per trade (lower for active traders or young investors)
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Visit Questrade Visit Wealthsimple Visit Qtrade

Related: Best trading platforms in Canada

The hard part is deciding which stocks to buy. You’ll want to do as much research as you can beforehand, understand how dividends work, learn how to track historical performance and understand what a company does before buying shares. You’ll also want to research the sectors they’re in to make sure they align with your risk tolerance and investing goals. 

ETFs and alternatives to defensive stocks

If individual stock picking is too complicated for you, you can still invest in defensive companies with exchange-traded funds (ETFs). ETFs are a collection of investments packaged together. They’re bought and sold like a regular stock on exchanges but provide an easy way to diversify your portfolio.

Some examples of defensive ETFs you might want to consider are:

  • XST: iShares S&P/TSX Capped Consumer Staples Index ETF
  • ZU: BMO Equal Weight Utilities Index ETF
  • HH: Harvest Healthcare Leaders Income ETF
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Related: Best ETFs in Canada

Another alternative to defensive stocks are GICs

Guaranteed investment certificates are investments that provide guaranteed interest while also protecting your initial investment. They’re one of the safest investments you can purchase, though it’s important to note that their performance is capped. That’s the tradeoff of guaranteeing your investment, making them a great option for risk-averse investors. 

Related: Best GICs in Canada

Are defensive stocks right for you?

Defensive stocks have their place in many investing strategies. If you want investments that provide steady returns that are somewhat recession-proof, they may be a great choice, especially during times of economic uncertainty. The tradeoff is that they don’t typically pop off and make massive gains. So, particularly in bull markets, defensive stocks are outperformed by others. 

As always with investments, do your due diligence, research the companies and industries you intend to invest in and proceed with caution. 

FAQs

  • What stocks do well in a recession?

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    Stocks that do well in recessions are companies that provide necessities, such as food, utilities and healthcare. That’s because even in times of economic uncertainty, people require these services.

  • What should I stock up on if a recession is coming?

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    If a recession is coming, make sure your emergency fund is healthy and that your investments align with your current- and long-term investing goals. It may be a good idea to reassess your investments and add stable options, such as GICs or defensive stocks.

  • What are the best defense stocks?

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    The best defensive stocks are ones for companies that sell or provide necessities such as food and utilities. During economic downturns, individuals tend to cut expenses in certain categories like luxuries, instead choosing to spend their money on essentials.

  • What does a defensive stock mean?

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    A defensive stock is one that performs well during all economic cycles. They’re considered stable investments because they’re less effective by the ups and downs of the economy.

Noel Moffatt Writer

Noel Moffatt is a Canadian fintech expert with a passion for simplifying personal finance. Based in St. John’s, NL, he draws on his background in finance, SEO, and writing to deliver clear explanations and actionable advice. Noel is dedicated to equipping readers with the knowledge and tools they need to make informed financial decisions, striving to make personal finance more accessible and understandable through his in-depth articles and reviews.

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