Which type of stock is generally associated with lower risk during market downturns?

Defensive stocks are typically associated with lower risk during market downturns because they represent companies that provide essential goods and services, such as food, utilities, and healthcare. These industries tend to maintain stable demand regardless of economic conditions, making defensive stocks more resilient in times of market volatility. Investors often consider them a safer investment, as they are less likely to experience significant declines in value compared to other types of stocks.

In contrast, growth stocks, while potentially offering higher returns, are often more sensitive to economic fluctuations as they rely on ongoing expansion and investor sentiment. Value stocks can provide stability, but their performance can still be impacted by overall market conditions. Penny stocks are generally considered high-risk due to their low price and high volatility, making them more vulnerable during economic downturns. Thus, defensive stocks provide a protective buffer, particularly in uncertain market environments.