Should You Be Investing in Safe Haven Assets?

investment

In the wake of recent world events, the markets have been rife with uncertainty. The Middle East has been riven by conflict, the European Union has been struck by crisis after crisis, and America is facing one of the most controversial presidential election contests in history. To add insult to injury, the existing tumult has been stirred to fever pitch in recent weeks by Britain’s vote in favour of Brexit.

This has left many investors in a quandary, wondering whether they should stick with their existing strategies, or retreat to safer ground and implement a more conservative approach to trading. For many, the latter has won out, and as a result, safe haven assets have surged.

If you’re new to the markets, however, you might not fully understand the purpose of these. Your portfolio may currently consist of only one type of investment instrument, so the thought of adding additional assets can be daunting.

In the case of safe havens, it needn’t be. Used by even the most experienced of investors during troubled times, these assets retain or even increase their value when volatility is at its peak, and are perhaps the most efficient tool in existence for limiting market losses.

If you’re considering adding them to your portfolio, then here are just three of the reasons why this is a very good idea under present circumstances…

Stability

One of the key points in favour of safe haven assets is that they have a stabilising influence in times of trouble. If you’re looking for investments that will not decrease in value in order to lessen your risks, then there are none better. From gold to the Japanese yen, even the worst tumult does not drag these assets down from their lofty perches, which makes them a wonderful portfolio addition for those seeking to create a safety net of conservative choices.

Balance

Safe haven assets are never a bad choice, but they need not be used in isolation. Frequently utilised as a tool for diversification, they can provide higher risk portfolios with the necessary balance and stability to pursue less certain avenues of income.

This is best explained using an egg analogy. Imagine that you have three eggs and three runners, who must complete a race against other teams carrying your eggs in their baskets. Prizes are available for everyone who completes the course with their egg/s intact, descending in value depending on the runners’ final positions, each purse payable to you as team manager. The faster runners (i.e. higher risk investments) are the ones most likely to claim high purses, but are also the most likely to jolt their eggs from their baskets and thus disqualify themselves and leave you out of pocket. Those less likely to win (i.e. safe haven assets) are more likely to complete the course, but won’t deliver you as great a purse. You can split your eggs any way you like between them. To give yourself the greatest chance of victory, you would of course give all of your eggs to your fastest runner. To spread your risk and give yourself the greatest chance of completing the course, however, you would spread your eggs between them, and this is how diversification works.

Profits

Thirdly and finally, consider this: the value of safe-haven assets during times of tumult tends to remain steady, if not increase. This means that for those who invest, now, with the world and the investment markets in tumult, is the perfect time to cash in on their maximum profitability, making gold and its ilk a very good bet if you’re on the search for trading success.

If you’re looking to add to your portfolio, consider safe haven assets today. Opportunity abounds if you’re only intelligent enough to take it.

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