The low down on safe haven assets

If you’re feeling like a rudderless ship in a stormy sea of investment uncertainties, you might want to find a safe harbour for your cash and park it in a safe haven asset for the short term.

Safe haven investments are generally uncorrelated to the broader market, allowing them to hold their value during a downturn. Investors flock to safe havens like gold, treasury bills and bonds, currencies and defensive stocks to lower their exposure and retain the value of their investment when the equities market gets shaken up.

  • They can diversify your portfolio and provide stability during unstable economic conditions. 

  • They won’t necessarily grow your investment and make you wealthy but can preserve it.

What are the characteristics of safe haven investment? 

  • High liquidity. Your investment is easily converted into cash.

  • Limited supply and continuous demand. Scarcity and high demand help maintain value, making the asset hard to replace with another investment vehicle.

  • Endured performance. Proven long-term utility of the asset.

  • Permanence. The asset doesn’t decline in quality. 

Bottom line: Safe haven investments can provide some peace of mind for anxious investors through stability, but you pay for that safety through lower returns.