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Keeping your investments safe

Many people who have worked hard to build a financial nest egg for many years are, naturally, keen to protect its value and after nearly a decade of low interest rates  where could investors look to keep their investments safe?

Gold, the US dollar, ‘defensive’ stocks such as utilities and pharmaceuticals, government bonds, cash – what do they have in common? In times of economic stress and market volatility, they are seen as safe havens for investors.

Price for protection

Investors post-Brexit may have increased concerns around a recession in the UK, slowdown in the European and the global economy, a break-up of the EU, and increased global political risk. There is no doubt that these scenarios are all possible, but by seeking traditional safe havens investors are likely to pay a high price for protection.

In the UK, if you want to put your money into a government bond for ten years, the Government will pay you just 79 pence a year for every £100 you lend it, and in Germany investors have to pay the German Government to own its bonds. A German ten-year bond yields -0.2%.

Defensive stocks drivers

We are currently in the second longest stock market bull run in history, and gains have been driven primarily by defensive stocks, which has arguably made them expensive. It is a high price to pay for the feeling of security. It has happened because in a world of economic uncertainty, the money pumped into financial markets by central banks via quantitative easing (QE) has been invested in the highest-quality assets first.

But paying such a high price for protection in traditional safe havens is a risk in itself. Like buying a house at the top of the market, there is the risk that the price can’t go much higher. While traditional safe haven assets may provide some protection for investments in times of economic and financial strife, they all currently carry risk because of their high prices.

Trickle-down effect

From there, the slew of central bank money has trickled down the investment pyramid into lower quality assets as investors have gone in search of higher returns.

Safe haven seekers

Options for safe haven seekers are very limited.

For many people the best solution is to ensure that they have a low cost, well diversified portfolio of investments that match their attitude to risk, their need for risk and their capacity for loss.  Invest for the long term and don’t get distracted by, or fearful of, short term market movements.  You can plan for what you need yourself  – Envision your Money has some great tools https://envisionyourmoney.com or look for an adviser who  is more interested in you and your life than selling you products. 

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.

THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.

PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.


Content of the articles featured in this publication is for your general information and use only and is not intended to address your particular requirements or constitute a full and authoritative statement of the law. They should not be relied upon in their entirety and shall not be deemed to be, or constitute advice. Although endeavours have been made to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No individual or company should act upon such information without receiving appropriate professional advice after a thorough examination of their particular situation. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of any articles.For more information please visit www.goldminemedia.co.uk

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