Investing is always necessary for good financial health. The simple reality is that any extra money that is not invested is seeing its potential wasted by the day. By using a strategy like asset allocation, you can make the most of your savings. However, investing during troubling times is particularly risky.
Unfortunately, we are in particularly troubling times. Inflation is at record highs, Russia’s invasion of Ukraine is causing huge uncertainty and financial strife, and many individuals and businesses are still struggling to recover from the pandemic. Many investments that would usually yield great results are risky at the moment.
For this reason, you may be considering a safe haven investment. There are no guaranteed safe havens, but some investments are extremely unlikely to crash except in a worst case scenario.
Here are the best safe haven investments to consider in the difficult days of 2022.
High-Yield Savings Accounts
High-yield savings accounts are the most common and one of the safest ‘safe’ investments. These savings accounts are insured by the Federal Deposit Insurance Corporation (FDIC). They are highly liquid, as you can convert them to cash if you urgently need to without penalties. They are also immune to market fluctuations.
Your yield in one of these accounts is going to be higher than in any other type of savings account, but still won’t bring in a huge influx of interest. Furthermore, at present, your APY is unlikely to keep up with inflation, meaning that your money is still losing value as it sits in one of these accounts.
Certificates of Deposit
A Certificate of Deposit (CD) is an FDIC-insured account that has far less liquidity and therefore higher yields. If you go for a CD and are willing to leave your money untouched for a number of years, your yields will be much higher than they would in a high-yield savings account. However, you need to be confident that you can leave that money untouched, as early withdrawals come with large penalties.
US Treasury Bonds
US Treasury Bonds are the safest investment you could possibly get. This is because the US government has never defaulted on its debt and does not look likely to do so in the foreseeable future. The main issue you will have with US Treasury bonds is that their yields are not particularly high. They are certainly not going to keep you up with high inflation.
Gold is an interesting safe haven, as it can fluctuate significantly. If you’re watching your gold investment on a constant basis, you may find it a bumpy ride, with the regular concern that your investment is losing money. However, gold is considered a safe investment because in the long term it has traditionally always held its value. For this reason, by investing in gold, you almost guarantee that your money will not lose value due to inflation.
The problem is that if you want high liquidity, you may be in for some struggles. With a looming recession, you need to consider the possibility that you may need emergency cash. Selling your gold in the short term may leave you with less than what you invested.
Corporate bonds offer higher yields but do carry more risk. You should only consider corporate bonds with a rating of AAA, AA, A, or BBB, which are considered investment-grade. While they are slightly riskier than government bonds, one may counter that with low-yield investments there is not just a risk but a guarantee that your money will lose value, even if it technically continues to grow.
Preferred stocks are hybrid securities with features of bonds and stocks. They do not have the same reputation as Treasury or corporate bonds. However, they do offer fairly good income potential, as well as the potential appreciation of the stock. They are riskier than the other entries on this list, as you may be impacted when the market falls. That said, they are considered safe haven investments because stock dividends are guaranteed no matter what the market does.
There are no investments that are 100% guaranteed to remain safe, but the above safe haven investments are the closest you will get. The option with the least risk is US Treasury bonds, but the low yields may mean the investment has little value in a high-inflation world.