Safe haven investing

Is any investment a sure thing anymore?

What the heck is going on in the global financial markets these days? You’ve got Europe practically collapsing under debt, the US has had two rounds of printing more money to keep its economy going and is talking about doing it again for a third round; and very few new jobs are being created anywhere. There is a big worry that the efforts governments are making to ‘spur’ their economies might work a little too well – like letting a genie out of a bottle; suddenly too much money in the system will make currency worth less, prices will skyrocket and boom, you’ve got an inflation problem on your hands.

Under such chaotic conditions, investors have been doing what they normally do in dangerous times: buying gold and “safe” currencies such as the Swiss Franc. Now gold is veering close to $2,000 an ounce making some analysts say the metal is crazy overvalued and poised for a fall. Meanwhile, the Swiss government has stepped in to slow down the pace of their money (if their currency shoots too much higher than other countries, no one will be able to afford their watches and chocolates and then where will they be?). So what’s an investor to do? Is there such a thing as a safe haven for investments anymore? Let’s take a look at your options.

Cash

Sticking it under the mattress? That’s a sure way to hang on to it – until you hear about the next warehouse clear-out sale on cashmere. Damn. Maybe not the safest way to protect your nest egg. If inflation is rising at say, four percent, a $100 cashmere scarf today will cost you $104 next year. In other words, the purchasing power of that money under your mattress is dwindling the longer you keep it there. Before you rush out to spend it now – remember, a cashmere wardrobe plus no savings equals no retirement pour vous. The upshot? Find an investment that will appreciate faster than the rate of inflation.

Currencies

When you buy another country’s currency, you are making a bet that their economy will remain stable and their currency will end up being worth more than everybody else’s – giving you greater purchasing power. Traditionally, investors have felt this way about the Swiss Franc and the Japanese Yen. The trouble is, these countries rely heavily on the business of exporting their products to the rest of the world for their income. Lately, as investors have rushed to buy more and more Francs and Yen, the value of their currencies has risen and the relative price for their exports then becomes more unaffordable. The governments of Switzerland and Japan have had to step in to slow down the escalation of their currencies, which in turn, reduces the return investors were hoping for. The upshot? Currency diversification is a good thing, but never put all your eggs in one Franc basket.

Gold

The truth about gold is that (like the stock market), over time, the trend is up. It’s everlasting gleam has always been of value and always will be a go-to investment for those spooked by the markets or other investments. However, like the stock market, gold works best as an investment when it’s held for a very long time – like forever. In between now and forever, the price will fluctuate wildly based not on the actual supply and demand of it – but merely on rumours and fears and greed. When an asset price escalates beyond its value on the basis of emotional buying – the market is said to be in a ‘bubble’. And we all know what happens to bubbles. The upshot? If you’re willing to hold onto your gold and not pay attention to the ebbs and flow of prices, your investment will very likely appreciate over time.

Investing in advice

If the market seems confusing, it is. There has never been a time when great advice has more value. The best way to hedge against risk? A financial advisor who has your back. That’s the best safe haven of all.

 

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