Rob Perrone: Seven substantial shortcomings of defensive equities

First, credit where it is due. Defensive equities have at least three serious virtues as investments: they benefit from a behavioural anomaly, they are often high quality businesses, and they tend to experience less painful drawdowns than other stocks.  The anomaly angle is appealing. For most equity investors, the only way to seek juicier returns is to buy racier stocks. This "lottery bias" leads to excessive buying of volatile stocks, which pushes their prices up and their prospective returns down. Defensive shares don't get their fair share of buying, the theory goes, allowing them to...