A market is a wild place, and it’s not easy maneuvering through the jungle. Bulls and bears battle each in an attempt to take control of the market. At times, no one feels safe. Good thing we got some safe-haven assets!
What Are Safe-Haven Assets?
As the name suggests, safe-haven assets are, well, assets that serve as safe havens. In times of market uncertainty, turbulence, or downright crashes, investors and traders seek the safety of these assets.
They are ‘safe’ because they retain their value even when everything’s going down, and the world is burning. Other times, they go up in value as the demand for them increases.
One thing, though, that traders need to remember is that one asset can be considered a haven in one market but not in another.
Volatility And Diversification
Investors want to fight too much volatility in times of turmoil. At the same time, they want to diversify their portfolios.
Diversification works like this: if you have two assets, and each asset is invested separately in different sectors, a decline in one industry will not automatically mean a similar decline in the other.
Often, a fall in one sector means a rise in the other, notably if they are inversely correlated.
By putting safe-haven assets in the mix, you are allowing your portfolio to have some chances of retaining its value even when aliens are destroying the stock or other markets.
Safe-Haven Assets For Your Consideration
As we have mentioned, some safe havens aren’t safe havens in other markets. However, through the years, the following assets have proven they retain their luster even in dark times.
Old But… Gold
Gold is used as a store of value. It’s a physical commodity whose value doesn’t fluctuate with interest rate decisions.
Investors use gold to insure themselves against potentially extreme events like market crashes or an outbreak of war.
So, when adverse events happen, investors buy up gold, propping up its demand and, therefore, prices. Gold also shines against the threat of inflation since it’s in US dollars.
T-Bill (Not A Tarantino Film)
Treasury bills, or T-bills, come with the full faith of the US government. So, there’s zero chance you won’t get something back when you invest in them.
They’re risk-free since the government will repay any principal investment. Investors run to these bills when the bear market is on a bloody rampage.
The Best Attack Is Defensive Stocks
They say that the best kind of offense is defense, and that’s pretty much what you’re doing when you’re investing in defensive stocks.
These stocks include utility, biotechnology, healthcare, and consumer staples. They are “defensive” stocks because, unlike others, these stocks aren’t sensitive to the condition of the market.
People will always buy the products under these companies because those products are necessities. You can’t imagine a modern world without people brushing their teeth or taking care of their hygiene.
The point is that you’re investing in stocks that may grow in value in the future but don’t shrink in tough times.
What’s Better Than Cold, Hard Cash? MORE Of It!
Finally, who could say no to thick rolls of bucks into one’s pocket? Cash is considered the truest haven in times of downturns.
For one, you don’t have to convert it into cash because it’s… cash. Unlike gold or stocks, you don’t need to find a buyer to encash some money.
On the flip side, cash doesn’t offer any yield or real return. Inflation also does a bit of work on it.