What Is a Safe Haven Asset?Jennifer Anderson
Financial experts agree troubled economic times are upon us. When the economy crashed in 2008, many investors lost everything in the blink of an eye. IRAs and 401(k)s lost up to half their value, and people who had been saving for retirement for decades suddenly found themselves with no options. In order to guard against those kinds of losses, many investors are looking to put their money into safe haven assets. But what is a safe haven asset, and how does it work?
Finding a Safe Haven
A safe haven is a type of investment that can be relied on to retain and even increase its monetary value, even while other types of investments are failing. In particular, a safe haven asset is something that you can still get money out of, even if the markets plummet.
So if a safe haven asset is so much more reliable, then why do people bother with stocks and bonds at all? Why not just put everything into a safe haven from the beginning? Well, the problem is finding one. Safe haven assets used to be plentiful. But over the past few decades, with every crisis our economy endures, they become more difficult to locate. Government bonds, for instance, used to be considered one of the safest investments around. Now however, bond payouts are continually shrinking, and people are losing money on them.
Even if you do find a safe haven asset, it still might be the wrong kind. The assets that are reliable in one type of market downturn can be a terrible idea in a different situation. If you play your cards wrong, your safe haven could end up as vulnerable as any other investment.
Reliable Types of Safe Havens
There are two types of assets that are generally considered to be a safe bet in any circumstances. The first is T-bills. T-bills, or Treasury bills, are like short-term government bonds. You can invest anywhere from $1,000 to $5 million in T-bills, and when they mature (usually a year or less later), you collect the dividends. Since the maturity time is so much less than for bonds, they’re less likely to lose value, making them a relatively safe investment.
However, just because they’re a safe investment doesn’t mean they’re a good one. They’re low risk, but they also have very little payout. So even though you won’t lose your money, they also won’t help you grow your savings much over time. If you’re within a couple of years of your retirement, they can be a good option, but otherwise, they need to be continually reinvested, and aren’t generally worth the trouble.
A much better safe haven asset is gold. Unlike stocks, bonds, and T-bills, gold is a physical asset with intrinsic value. Its value isn’t going to plummet just because the markets do. In fact, during times of market turbulence, gold historically increases in value, making it a great way not just to keep your money safe, but to grow your portfolio and make sure you have enough stored away for your retirement.
As the world economy continues to decline, the last thing you want is to find the investment portfolio you’ve been building over decades to be suddenly worthless. Putting at least a portion of your retirement funds into a reliable safe haven asset like gold is the best way to safeguard your future.