As a more cautious attitude pervades the market, “defensive” investing has come back into vogue. But what constitutes a defensive stance? Experience shows that what is advertised as a safe, stable asset, often ends up being far less secure than expected.

People tend to fall in love with the label, forgetting to carefully read the ingredients.

Take utility stocks, for example, the classic “widows and orphans” vehicle. Tell that to the holders of Pacific Gas and Electric and Edison International, the California power providers that wracked up more than $12 billion (US) in debt while struggling to keep the lights on and stave off bankruptcy. Closer to home, despite recent gains and an increase in its dividend, TransCanada PipeLines has not yet repaired the damage from cutting it in 1999. That move chopped the value of the stock in half.

Many investors shifted money from the tech meltdown into big pharmaceuticals — which are pretty “techy” in their own right. Who can blame them — after all, don’t people still get sick in recessions? But Pfizer, with a price-earnings ratio of 74? That’s jumping out of the frying pan and into the fire, in our estimation.

Laidlaw was the quintessential blue-chip defensive stock, it’s hard to imagine anything with a better bedrock revenue flow than busing school children. Yet it only took a few missteps to send this organization into intensive care.

Traditional safe havens have fared little better. While the odd gold bug remains, most of these relics have gone deep underground. Sure, this species might return again like cicadas, but it would take an amazing renaissance to make up for two decades of miserable prices.

Real estate is a perfectly safe way to make easy money — if you believe the late-night infomercials. But the early nineties are not such a distant memory that people have forgotten this sector’s collapse.

Government bonds? Maybe, if you can identify a truly stable currency. The dollar, pound and yen have all had their disastrous runs, and so far the euro has not inspired confidence. Don’t forget that it was a default on Russian bonds that nearly unhinged the global economy a couple of years back.

Some sectors, if not immune, are definitely less affected by slower economic growth. But any organization is only as good as the people in charge. If they blow it, the notion of safety goes out the window. And for firms that appear to have it all — good management, innovative products, a growing market, brand loyalty, economies of scale — their stocks have a habit of being “priced to perfection” already. When you’re at the top, the next move is very likely to be down.

The lesson is that there is no such thing as a truly defensive investment that can be counted on for sanctuary during troubled times, or any other time for that matter. The one certainty is that where there is reward there must be risk. Unfortunately, risk is always difficult to measure, and it runs far deeper than the contemporary notion that potential danger can be predicted by past volatility.

So what to do? Beyond the obvious tenet of diversification, investors need to cultivate a defensive “attitude.” This is a tough concept to define succinctly, so here is a laundry list: Be skeptical. Don’t overpay. Talk to management. Understand what you invest in. Avoid inflated expectations. Admit mistakes. Don’t fall in love with your winners. Avoid debt-laden companies. And remember, making money is only one side of the equation. The other component is preserving capital.

Lastly, there is a world beyond stocks. It’s usually wise to pay down debt, especially if a crunch might be around the corner. A good night’s sleep is the surest return.