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Santoli: Beware the high price for 'safe' stocks

Yellow "Caution" tape is displayed outside of the New York Stock Exchange.
Michael Nagle | Bloomberg | Getty Images
Yellow "Caution" tape is displayed outside of the New York Stock Exchange.

Overpay for prudence by too much and it can start to look like financial recklessness. Buying a $20 service contract for a $40 toaster is burning cash for the warm feeling of being protected.

But what about paying bloated prices for an entire class of stocks whose main virtue is a reputation for steadiness and a trickle of cash income?

This is the question facing the throngs of investors favoring "defensive" market sectors, especially those crowding into fund strategies engineered to promise most of the rewards of equity investing with a gentler rise.

These include the PowerShares S&P 500 Low Volatility exchange-traded fund (SPLV) and iShares Edge MSCI Minimum Volatility USA ETF (USMV), as well as the sector funds tracking the utilities and consumer staples sectors.