With the Fiscal Cliff just a few days away, investors are becoming all the more cautious as the risks are high for the U.S. economy to slip into another recession. The recent sell-offs in the market and the volatile moves are further evidence that market participants are growing worried over the impact of the economy diving over the cliff as we head into 2013 (Biotech ETFs: A Fiscal Cliff Safe Haven?).

In such a scenario, the defensive sectors generally act as a safe haven and can be a great option for investors who desire to play safe. When it comes to investing in defensive sectors utility and consumer staples come first to mind.

Utility and consumer staples play their defensive role when the market turns south. This is because the products like power and water are the basic necessities that have relatively stable demand. Energy and water will possibly see a steady demand regardless of the circumstances in the market and hence could provide a shield from shocks in the marketplace (So Much for Safety: Utility ETFs in Bear Territory).

Similarly the consumer staples sector appears to be defensive as it includes manufacturers and distributors of food, beverages and tobacco and producers of non-durable household goods and personal products.

Also included are food & drug retailing companies as well as hypermarkets and consumer supercenters which are considered essential for daily needs. These products see a steady demand even during an economic downturn due to their low level of correlation with economic cycles (3 Consumer Staples ETFs for the Shaky Market).

Investors should note that the utility sector is also popular for its high yield which it provides to its investor. If we get over the fiscal cliff tax on dividends would be charged close to 45% which is much higher than the current 15% level. So, despite the defensive nature of the sector, it seems to be less attractive for investment.

However, the consumer staples sector does not offer such high yields on average. Investors therefore need not worry about the high dividend tax rate. They can thus shift their assets to this sector.

Investors seeking for safe havens if the fiscal cliff takes place can look to invest in this defensive sector that looks to be less impacted by the Cliff (3 ETFs to Prepare for the Fiscal Cliff). But instead of investing in single stocks, investors can put in their money in a portfolio of stocks in order to avoid the volatility of individual stocks.

ETFs are a great way to gain exposure to defensive sectors. We have briefly described below a handful of ETFs that provide access to stocks in the consumer staples space for those looking for a lower risk choice in today’s uncertain environment: