Investing Safe Havens When the Market is Volatile

It’s easy to hate on markets when they suddenly go from a bull run to a bear stand still. But you have to remember that this is their nature.

There will be times when a market is up and the economy is doing well. This is when we expect to see high-returns and stability. In other times the economy takes strain, the market shows volatility, and most stocks experience a decline in value.

As much as analysts try to forecast when one market cycle starts and the previous market cycle ends, there’s no sure fire way to predict this.

The good news is; history has shown us that returns during bull runs are much more positive than losses when the market is bearish. And the good times tend to last much longer than the tough ones. From 1956 the average period of market downturn has lasted one year and two months, showing a decline of 36%. In contrast, a healthy market run has lasted 5 years and 9 months with an average return of 192%.

With those silver linings in mind, there are a few ways to invest during times of market uncertainty that are lower risk and considered safe havens.

Government Bonds and Bond Themed Exchange Traded Funds

When you purchase a government bond, you are essentially lending money to the government in exchange for periodic interest payments and the return of the principal amount at maturity.

Government bonds are considered relatively low-risk investments because they are backed by the government's ability to tax its citizens or print more money to meet its debt obligations. As a result, government bonds are often used as a benchmark for other types of debt securities and are considered a safe-haven investment in times of economic uncertainty.

Bond themed ETFs are also considered defensive investments because they tend to be less volatile and provide more stability compared to stocks or equity ETFs. Bond ETFs invest in a portfolio of bonds issued by governments or corporations, and these bonds typically have fixed interest rates and maturities. As a result, the returns from bond ETFs are often more predictable and consistent than the returns from equity ETFs.

In addition, bonds and bond themed ETFs can offer some protection against inflation because the interest rates paid may increase in response to rising inflation. This can help to preserve the value of your portfolio during periods of inflation.

Tip: Search “Bond” using this finder to view bond themed ETFs and sort by provider.

Gold and Precious Metals

Gold and other precious metals are considered safe haven investments for a couple of reasons.

These metals are rare and difficult to extract from the earth, which means their supply is limited. This makes them a valuable commodity that is not easily replicated, unlike paper currencies which can be printed without limit.

They are also universally recognized and accepted as valuable assets. They have been used as a medium of exchange for thousands of years and are still widely accepted as a form of payment in many parts of the world.

There are different ways to invest in gold without physically owning it:

• Gold themed ETFs are designed to track the price of gold and other precious metals. Investing in a gold ETF is a convenient way to gain exposure to the price of gold without the need to store physical gold.
  
  Tip: Search “Gold” using this finder to view gold themed ETFs and sort by provider.
  
  
• Investing in gold mining companies is another way to gain exposure to the price of gold. This type of investment carries more risk than other forms of gold investment because mining stocks can be affected by a variety of factors, such as the price of gold, mining regulations, and geopolitical events.
  
  Tip: Use the category tags when you are browsing investments in your EasyEquities account to filter by industry. You can find mining companies under the Industrial Metals and Mining category.
  
  
• Unit Trusts that invest in gold and precious metals can be a good option for investors who want exposure to the sector but do not want to take on the risk of investing in individual mining stocks. Unit trusts typically invest in a diversified portfolio of stocks and charge a management fee for their services.

Property

Property investments can provide a safe haven during market volatility as they tend to hold their value and generate rental income.

Similarly to gold and precious metals, property is a finite resource, which means that the supply is limited. This can create scarcity and drive up demand, which can help to support property prices over time.

Property can also provide diversification benefits to a portfolio, as it is a different asset class than stocks and bonds. This can help to reduce overall portfolio risk and provide a more stable return profile.

While many investors are put off by the capital outlay, maintenance and hidden costs of owning a physical property; new prop-tech innovations have paved the way for a much lighter touch, affordable experience that delivers on the benefits associated with owning property.

You can invest in property using EasyProperties, which exposes you to assets that have been selected by a panel of experts based on sound investment cases. These investments can provide you with rental income, potential growth on your investment and liquidity – you are able to buy and sell your stake at quarterly auctions.

Tip: More on how EasyProperties works and how you can access it from your EasyEquities account here.