Investors have been on a crazy ride this year. In addition to being the year when a roll of toilet paper is more dear than a gallon of oil, it’s also been the year of more marketwide trading halts than you’d normally see in an entire decade.
There is hope, though: Since mid-March, “central banks, national governments and others have all responded, and markets have found their footing,” says Tim Shaler, economist-in-residence at iTrustCapital in Newport Beach, California. “But there is now a legitimate concern that policy makers will overshoot and allow some global inflation.”
While firms such as iTrustCapital saw new account balances increasing by 78% between March 15 and April 10, many investors are seeking more stable, or “safer,” investments for their portfolios. Here are three safe investment options right now:
- The “utilities of the future”
- Health savings accounts
“In the past, investors could and largely (did) turn to cash and fixed income for the defensive elements of their portfolios,” says Richard Hayes, CEO of The Perth Mint, a Western Australian government-owned precious metals enterprise and custodian of the Perth Mint Physical Gold ETF (ticker: AAAU). But with “U.S. Treasury bond yields suggesting we could be in a low to negative real interest rate for at least another decade,” he says, “many of these assets are likely to deliver negative real returns for the foreseeable future.”
As a result, gold may take on a larger role in diversified portfolios.
Gold is traditionally negatively correlated with U.S. stocks when markets decline, as we saw in the first quarter of 2020. “When equities have sold off, gold has tended to rise, providing balance at the portfolio level,” Hayes says. The result is investors who hold both stocks and gold have seen lower volatility than stock investors alone.
On the flip side, he says gold has historically been positively correlated with stocks when they rise. So while it may not rise as high as stocks, gold does tend to contribute to portfolio performance in rising markets, he says.