I get it. From the thousand articles you read this week about the market, gold has been mentioned over and over again as a safe-haven asset. And yes, despite the metal has shown some pretty wild volatility in the last few weeks, it can be still called a safe haven.
But that was not the question, right? Before understanding whether gold is or not the best safe-haven asset out there, let’s make sure everyone understand what a safe haven actually is:
“A safe haven investment diversifies an investor’s portfolio and is [...] uncorrelated or negatively correlated to the general market during times of distress. While most assets are falling in value, safe havens either retain or increase in value.”
Not clear enough? When markets drop due to a certain event or catastrophe, and most assets are performing negatively, investors ran away massively in search for assets that will not be impacted as much as typical risky assets such as stocks or commodities.
The yellow metal is a good example. Gold has been playing for quite a long time the main role in the safe-haven game. But unfortunately, gold is not the best safe-haven asset out there.
Ok… so which one is?
Not that I want to break it for you, but that’s something you have to understand by your own. Why? Because nobody else knows your portfolio as well as you and therefore, it’s only you who has the ability to identify those periods when your assets go under pressure.
If you are fishing for alternatives in anticipation of a big crash in the near term, then you should keep in mind (at least) these next three options (without mentioning gold):
1 - Cash
Believe it or not, cash is one of the obvious safe-haven options you’ve got. When things are going south, just take the cash and put it down the pillow. Need less risk? Get an fire insurance. Be aware that this option offers no return rate and it can be hit by inflation.
2 - Defensive Stocks
Two words: basic needs. You might need to change that pretty Mercedes Benz for a Chevrolet, but you will definitely not stop brushing your teeths. And that’s only a simple example. Think about medicine, products for kids, everything that’s almost essential to your everyday life.
3 - Treasury Bonds
I get it. The return rate is not THAT seductive. But hey, they are risk free, and in a bearish market… that’s a lot to ask. So you might want to consider this option after all.