Home Investments Best ‘safe haven’ investments in September 2022

Best ‘safe haven’ investments in September 2022

by Ozva Admin
v

Flexible investment markets can shake your faith in riskier investments like stocks and shares.

Markets have been in turmoil this year: the US S&P 500 index has tumbled about 15% since January, for example, while the eurozone’s Euro Stoxx index has fallen by a similar amount. In such conditions, investors often turn to “safe havens” for their money.

Safe havens in this context are stable, lower-yield savings and investment options that help protect your cash in tough economic times, but also offer the potential for modest growth.

Safe havens tend to demonstrate one or more of the following characteristics:

  • Liquidity: where the asset in question can be easily converted into cash at any time.
  • functionality: the asset is associated with a use that remains in demand in the long term.
  • Limited resources: where the growth of supply never exceeds demand.
  • Certainty of demand: when an asset is unlikely to be replaced or become obsolete.
  • Permanence: so that the asset does not decay over time.

Even when considering the relatively benign world of financial safe havens, it’s worth remembering that no investment is 100% safe. Capital is always at risk.

There is also a slight element of danger associated with savings products: your capital may be safe, but this is offset by the risk of your account provider going bankrupt. However, as explained below, the UK government provides a safety net in such cases of up to £85,000.

If you’re looking for alternatives to volatile markets, the following tips fall into the safe haven category in that they offer less risk than stocks and shares and provide potential financial peace of mind.

Trade with eToro

Trade a variety of assets, including stocks, ETFs, and cryptocurrencies; for both beginners and experts

Open account

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with eToro. Investing in crypto assets is not regulated in most EU countries and the UK. No consumer protection. Your capital is at risk.

High Interest Checking Accounts

High Interest Checking Accounts (HICA) are current accounts offered by providers such as major banks, often with higher interest rates than traditional savings accounts. As an incentive for clients, some HICAs also offer cash rewards for ‘login’.

HICAs tend to impose requirements on clients, such as insisting on a minimum monthly financing amount or stipulating an upper limit on interest-bearing balances.

Other conditions may also apply. For example, an account holder may be required to establish a minimum number of direct debits attached to the HICA. There may also be a time limit on the interest rate deals that are offered.

Please note that some accounts also charge a monthly fee. Before committing to a product, assess how the charges (recurring fees, for example, or overdraft penalties) compare to the enhanced interest rate being offered.

Current accounts are regulated by the Financial Conduct Authority. Licensed banks in the UK fall under the Financial Services Compensation Scheme. This protects clients in the event of corporate bankruptcy to the tune of £85,000 per person per institution.

Prayed

invest in gold can provide stability and diversification to an investment portfolio, especially during times of economic turbulence.

Gold is referred to as a safe haven because it offers investors the potential for wealth preservation. Traditionally, the precious metal has provided a good hedge against inflation.

This is because, in theory, increased demand during inflationary periods, such as the ones we are experiencing now, with prices in the UK rising by 9.4% year on year, can lead to an increase in price. of gold.

The UK’s inflation rate is not expected to drop any time soon thanks to rising energy prices and the ongoing conflict in Ukraine. Indeed, the Bank of England recently warned that it expects UK inflation to peak at 13% later this year, before remaining at “elevated levels” until 2023.

In addition to cash, stocks, bonds, and property, gold can also provide investors with the most important element of diversification. Diversification is useful because it offers a form of financial protection when one asset class, such as stocks, underperforms.

Gold is often said to be inversely correlated with other asset classes. In other words, if stock markets fall due to economic uncertainty and rising inflation, gold may outperform.

You can buy gold directly, in the form of bars, coins or jewelry. Alternatively, it is possible to gain exposure through pooled investments that aggregate the contributions of different investors into a managed fund.

A third option is to invest indirectly by buying shares in companies that mine, refine and trade gold.

Keep in mind that while share prices of mining companies tend to correlate with the price of gold, individual share prices are also affected by fundamentals such as profitability, environmental issues, and geopolitical and financial risks. regulatory.

Exposure to gold is not without risk. As with any asset class, the price of gold fluctuates and is subject to the laws of supply and demand, so you could lose your original investment.

Captivity

Bonds are an investment that tend to be safer and less volatile than stocks and shares.

In terms of risk, think of them as a halfway house between having your cash on deposit and full-fledged capital investment.

Bonds are essentially loans issued by governments, companies, and financial institutions (learn more here about fixed rate bonds issued by the latter).

Bonds can be traded in the markets in the same way as stocks and shares. They have a lower profile than the latter, but the market for them worldwide is huge: around £100bn according to the Securities and Financial Markets Industry Association.

In the UK, government bonds are known as ‘gilts’, while in the US they are known as ‘Treasury’. Bonds are best thought of as ‘notes’ that work the same way regardless of the issuer.

When you buy a bond, you lend money to the bond issuer in exchange for interest payments over the life of the bond (also known as the “coupon”), plus repayment of your initial loan when the bond matures.

Bonds are also known as “fixed rate securities” because, as an investor, you know in advance the return you will receive on your investment.

The interest rate, or coupon, you receive varies from bond to bond. The riskier the bond, the higher the interest rate you can expect to receive, along with the greater chance of not getting your original investment back.

High-quality government debt from countries such as the UK and the US (neither of which have ever defaulted) is lower on the risk scale than corporate-issued debt.

Rating agencies such as S&P, Moody’s and Fitch analyze countries and companies and classify their credentials in terms of the quality of the debt that is issued.

You can buy bristles from the UK at the Debt Management Office. Gilts can also be purchased through a stockbroker or bank using the Retail Purchase and Sale Service. This would incur fees, reducing earnings.

It is also possible to invest in fixed interest securities through mutual funds and exchange-traded funds, usually through investment platforms Y commercial applications – who specialize in holding bonds.

invest in bond funds via stocks and shares individual savings account (ISA) provides a tax-exempt wrapper for your investments.

Trade with eToro

Trade a variety of assets, including stocks, ETFs, and cryptocurrencies; for both beginners and experts

Open account

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 68% of retail investor accounts lose money when trading CFDs with eToro. Investing in crypto assets is not regulated in most EU countries and the UK. No consumer protection. Your capital is at risk.

Property

Investing in property is far from risk free. But exposure to bricks and mortar can be placed in the ‘relatively safe’ investment box. The property also has the potential to produce an income stream, along with the prospect of capital growth.

It is possible to invest in property in various ways, either directly or indirectly. The most obvious way is to buy a building and rent it out. Keep in mind that in addition to the purchase price and any associated mortgage, there will be additional fees (estate agents, lawyers, surveys, stamp duty, insurance, rental agents) to find.

An alternative is to buy a specialist real estate investment trust that focuses on commercial, industrial and office buildings.

The performance of real estate funds is often dependent on the performance of the economy. In good times, the demand for properties increases. This drives up both rents and property prices and causes additional construction. During downturns or recessions, the opposite tends to happen.

As with any investment, the value of real estate investments and the income they provide can go down as well as up.

Property also has the disadvantage of being a relatively ‘illiquid’ asset, ie one that may be difficult to sell. In extreme cases, investors can be trapped in property portfolios while waiting for managers to sell the buildings.

no guarantees

It bears repeating that there is no such thing as a completely risk-free investment. Even so-called safe havens carry risks.

For example, the most ironclad savings account that pays a fixed interest rate will experience a loss of purchasing power thanks to inflation.

But the worst thing savers and investors can do is sit idly by, especially in times of extreme inflation. Making your money work as hard as possible is one of the key pillars of prudent financial planning.

You may also like

Leave a Comment