- Non-cyclical stocks are those that stay relatively uniform, regardless of how well the economy is performing
- Everyday staple products, such as toiletries, utilities, food and pharmaceuticals are considered non-cyclical
- They are the last products people will eliminate from their budget when the company hits a recession
- Integrating a combination of cyclical and non-cyclical stocks into your portfolio is a good strategy to protect your investments from volatility
Investing in non-cyclical stocks
It’s important to note that non-cyclical stocks will underperform the market when it’s booming and outperform the market when the economy is in a recession. That’s why it’s recommended to integrate a combination of cyclical and non-cyclical stocks into your portfolio. That way, you will gain some of the upside when the economy is booming, but you will also be protected when the economy is in a recession. For example, consumer staples companies thrived during the early stages of the Covid-19 pandemic when people needed to stock up on essentials and didn’t have the freedom to dine out and leisure.
What types of stocks are non-cyclicals?
Food: People still need to eat, regardless of whether the economy is doing well or not.
Petrol: Driving is a vital mode of transport for people, even if the economy is underperforming.
Pharmaceuticals: There is a demand for pharmaceuticals regardless of whether the economy is on an upwards or downwards trend.
Utilities: People need power and heat for their homes in order to keep themselves and their families warm.
Toiletries: Toilet paper, cleaning products, toothpaste and shampoo – these are goods we need everyday!
Companies with non-cyclical stocks
Want to know what sort of companies hold non-cyclical stocks? Here’s some examples for you:
- Coca-Cola Company
If you wish to invest in non-cyclical stocks but don’t know which stock to go for, a safer option is to invest in an exchange-traded fund (ETF), such as the Vanguard Consumer Staples ETF.