WHY SAFE HAVEN INVESTMENTS ARE KEY TO BUILDING WEALTH

When it comes to building wealth, safe haven investments are something that will generally come up in the conversation somewhere. In general, those who are new to the wealth building concept may be turned off by the idea. After all, safe havens don’t generally come with high returns, and in the game of building wealth, it’s all about making your money work as hard as possible for you. However, it’s important that you do not dismiss the importance of investing at least some of your money in safe havens. Today, we’ll talk about what a safe haven investment is and why it’s an important part of the wealth building process.

WHAT IS A SAFE HAVEN INVESTMENT

Have you ever heard the word hedge? The idea of making a secondary investment, just in case your primary investment model falls through and ends up with losses. Well, safe haven investments follow along those same lines, but in a very different way.

You see, high return investments, like stocks, generally come with a higher rate of risk. One of those larger risks is a massive amount of exposure to economic conditions. Think about it. When the global economy isn’t doing well, the market crashes. Many watch as their retirements are nearly wiped away, with little they can do about it other than to take their money out of the market and hope to have enough to reinvest when things start to pick up. This is where safe haven investments come in.

Safe haven investments are investments that tend to hold their value during times of unstable economic or market conditions. For example, gold is a great safe haven investment. This is for a good reason. You see, when economic conditions are poor and the value of paper money, stocks, and more fall, investors tend to look to gold to keep the value of their assets safe. This leads to gains in demand for the commodity, ultimately pushing it’s value upward.

Another safe haven is treasury bonds. While these bonds come with a very low interest rate, which in the investing world is the rate of return, they are also guaranteed by one of the most trusted sources in the world, the government. As a result, treasury bonds are a great way to keep value in assets, while earning a return, in the midst of tough economic or market conditions.

WHY SAFE HAVEN INVESTMENTS ARE AN IMPORTANT PART OF BUILDING WEALTH

While safe haven investments don’t tend to grow in value at a high rate of speed, they are a very important part of any balanced wealth building portfolio. The reason for this is relatively simple. At the end of the day, the market doesn’t always move in the same direction. While historically, the trend is upward overall, there are indeed some down times. After all, the market is a compilation of a series of trends. Every once in a while, the market will correct, leading to big losses in the process.

Having your portfolio balanced with at least 20% in safe haven investments will save you from losing too much when the market is in a down trend. Think about it. When the market falls, stocks fall, currencies fall, indices fall, and more. However, during these times, gold, silver, and other safe haven investments all tend to climb in value. So, essentially, the safe haven portion of your portfolio is your insurance policy. It’s the part of your portfolio that just about guarantees that you will never take to big of a hit in the market.

FINAL THOUGHTS

While safe haven investments generally don’t come with the high returns you’ll think about when coming up with a wealth building strategy, they do indeed come with a sense of security and they are indeed an important part of any balanced portfolio. So, make sure you include some safe investments in your portfolio in order to protect your assets during those rough times in the market.

This article was written for marketing purposes and does not constitute investment advice. The information in the article represents the general views of our experts and does not take into consideration the personal circumstances, investment experience or financial situation of any reader.