Safe Haven

As per the Safe Haven definition, it is referred to as a type of investment that is anticipated to increase or retain in the overall value in cases of Market turbulence. Safe havens are highly sought-after by investors for limiting the overall exposure to significant losses in case of some market downturn.

However, the assets that can be actually referred to as safe havens would vary significantly on the Basis of the specific down market. This implies that for the given investment to serve as the safe haven, investors are expected to perform well with due diligence.

Safe Haven Meaning

A safe haven type of investment helps in diversifying the Portfolio of the investors. At the same time, it also turns out to be immensely beneficial during the time of market Volatility. In most cases, when the market would fall or rise, it might be for a shorter period of time. However, there are specific instances, like in the case of economic Recession, in which the overall downturn of the market gets extended. When the market might be in turmoil, the respective market value of a majority of investments tends to fall steeply.

While the occurrence of the given systematic events in the existing market might be inevitable, there are some investors who look forward to buying safe haven assets. These assets might be negatively correlated or uncorrelated to the given market at the time of distress. While a majority of the assets would be falling in the overall value, safe havens are known to either rise or retain in terms of value.

Safe Havens Instruments

There are several investment securities that can be regarded as safe havens. Some of these are:

Gold

For multiple years, gold is regarded as the store of immense value. Being a physical commodity, gold cannot be printed in the form of money. Moreover, its overall value cannot be influenced by the decisions with respect to interest rates by the government. As gold is successful in historically maintaining the overall value over time, it depicts to be a type of insurance against economic events that cause distress.

Treasury Bills or T-Bills

The given debt securities are backed by the means of full faith as well as credit by the government. Hence, these are regarded as safe havens even in times of Economic Conditions that are in turmoil. T-bills are regarded as risk-free.

Defensive Stocks

Some of the common instances of defensive stocks are companies in the fields of healthcare, consumer goods, utility, and biotechnology. Irrespective of the market’s state, consumers will still continue purchasing food items, basic home supplies, and health products.

Cash

Cash is regarded as the ultimate safe haven at the time of market downturn. However, cash is known to offer no real yield or return. Moreover, it might be negatively affected due to Inflation.