Safe haven assets supposedly retain their value over time. But it isn’t always so.
Myth 1
Cash is king
Fact
Holding cash has its downside
The value of a dollar is worth more today than tomorrow - thanks to inflation. Even the most conservative investors need to invest their cash to make sure their savings grow faster than inflation. Particularly when interest rates are low.
Idle cash not invested is lost potential returns. Idle cash in the bank should not exceed 6 months of living expenses.
Myth 2
Gold never loses its shine
Fact
Gold has its share of risks
Gold may be a hedge against inflation, but it is an unproductive investment in that you don’t earn income from holding gold.
While gold adds diversity to a portfolio, its price is affected by market sentiment, the economy and the US dollar.
Other than gold coins or bars, you can consider buying the shares of gold mining companies but look out for their profitability.
Myth 3
US Treasuries are the safest assets
Fact
Nothing is completely risk-free
US Treasuries are government bonds, highly liquid, enjoy a high sovereign rating and have never defaulted.
But as with all bonds, rising interest rates can erode the value of your investment.
Central banks tend to raise interest rates to counter inflation. Investing in Treasury Inflation Protected Securities (TIPs) is one way to protect your portfolio against this risk.
