The stock market is as jittery as a prize race horse, with huge recent swings in all directions. Many investors are looking for a safe haven investment to protect their retirement income from losses. Others simply want to diversify their portfolio and invest in a mixture of asset classes.
But what type of safe haven investment should you consider? Recent history has shown that some traditional safe harbours like US treasury bonds can be almost as volatile as the stock market.
Safe haven investments have a different growth cycle to the stock market
Can help insulate your portfolio from volatility
Have you considered art, wine, wheat or metals?
A safe haven investment aims to insulate your stock portfolio from the ups and downs of the stock market. It usually has a different investment cycle to stocks and shares. That means it should reduce the volatility of your portfolio, sometimes going up when the stock market goes down or vice versa.
Of course no investment is completely safe and you could lose money rather than making it. However, most experts recommend that you spread your investments across different asset classes to minimize your investment risk.
Wouldn’t it be great to invest in the next Picasso or Rembrandt. In reality, none of us can predict which art pieces will be worth big money in the future, and buying from a well known artist is out of the reach of ordinary investors.
But there are now several ways investors can buy a share in established art ranging from buying physical art to investing in art funds. portfolio managers like MasterWorks, allow you to buy a stake in blue-chip art. The fund buys art at auctions on behalf of its investors and creates a holding company for each piece of art to buy, store, promote and resell it.
You can invest in hot artists like Banksy or Andy Warhol by buying shares in the holding company. Masterworks currently has around 250,000 investors and that figure is growing fast.
Like other types of safe investment, the art market is not highly correlated with the stock or bond markets. That means it could be a good way to diversify your investments and minimise volatility within your portfolio. give yourself a margin of safety by spreading your investment between several different artworks and don’t put all your eggs in one basket.
Wheat is an essential staple across the world and, despite trendy diets, it isn’t going anywhere soon. Around 20% of the world’s calories still come from wheat and demand is likely to continue to increase as the world’s population grows.
Wheat is a classic safe haven investment because boom or recession, rain or shine, people will always need to eat. Russia and Ukraine are both big wheat exporters and the recent conflict in Ukraine has further stoked rising wheat prices and they are up 70% in one year. Prices are also affected by the continuing energy crisis as farmers and producers face increased energy and fertiliser bills.
If you want to invest in wheat then you could try investing through a wheat futures ETF like the WisdomTree Wheat ETF.
We all know that, when it comes to wine, you get what you pay for. The most expensive bottle sold by Majestic Wines is currently the Vega Sicilia ‘Único’ 2011, Ribera del Duero: a mere sniff at £425 per bottle.
But when it comes to wine investment, the sky’s the limit. In Christie’s Finest and Rarest Wines and Spirits auction in London in December 2021, £7.6million of sales were made. One bottle sold for the price of a small house at £269,500.
Wine investment is certainly not risk free but it could be considered a safe haven investment as it doesn’t move with the stock market. The luxury goods market tends to keep its value, even during a recession.
If you want to dip your toe in the winepress then wine merchants and online platforms make it easy for people to invest in wine with as little as a few hundred pounds. Using software like CellarTracker can help you analyse the wine market and decide what to pick. You will need to watch out for hefty storage costs, which can eat into a small portfolio.
Watch out and check you’re using a trustworthy company. You will not be protected by the Financial Services Compensation scheme as wine investing isn’t regulated.
If you want to add green energy to your investment portfolio then you could consider a green energy ETF. Green energy is big news and many governments across the world are committed to using more green energy in the future.
There are several green energy investment trusts and ETFs to choose from. The Greencoat UK Wind PLC the Impax Environmental Markets investment trust are both possible options. The Greencoat trust invests in renewable energy infrastructure and the Impax trust invests “alternative energy and energy efficiency, water treatment and pollution control, and waste technology and resource management.”
Commodities, like metals tend to have a different growth cycle to the stock market which could make them a good safe haven investment. Many metals are increasing rapidly in price due to supply chain problems and increasing demand.
If you want to invest in commodities like precious metals (such as gold) but don’t have access to a bank vault, then an easy option is to invest in a metals ETF. There are a few different options available. You can either invest in an ETF that buys physical metals like the WisdomTree Physical Precious Metals ETF. Or you can opt for an ETF that invests in metals future contracts like the Invesco DB Base Metals Fund.
Diversifying your investment portfolio and picking some safe haven investment options can be a great way to insulate your investments from stock market volatility. By picking some unusual safe haven options, you will also get the chance to invest in something exciting and could be part of the next big thing. Like any other investing, make sure you do your research and only invest a small amount of your overall wealth in any one investment.