The re-emergence of market volatility has not come as a surprise to investors.

The resurrection of US-China trade tensions, the change of direction in US interest rates, emerging market stresses in Argentina and the political uncertainty surrounding Brexit are only a few of the various factors that are unsettling markets during the traditionally quiet summer months.

Against this backdrop, concerned investors will be searching for safe places to put their money. Here’s our top 5:

Bonds

Fixed income investments are generally thought to be safer than shares. That’s because the returns they offer are more predictable.

As long as the issuer (a company or government usually) does not default, you know what the income will be and how much and when you will get your money back.

Because of this certainty, however, the returns on bonds have historically been lower than from shares.

And today, the prospective returns are lower than they have ever been. That’s because demand for bonds is so high that prices have risen sharply and the yields they offer have fallen.

In some cases (bonds with a value of $16trillion around the world) the yield is actually negative – investors are paying for the certainty of a return of nearly all their money back in due course.

Bonds might rise further but the risks are certainly much higher today than they have been.

Gold

Another traditional port in the storm, the precious metal has risen in value this year as investors have sought shelter from the market turmoil with the price of gold rising above $1,500 for the first time in six years.

The attraction of gold is its scarcity. Unlike a paper currency a government can’t print more of it at will.

That means it tends to hold its value over time.

The downside of holding gold is that it pays no income, which means it becomes less attractive as interest rates rise.

That, however, looks like a distant prospect at the moment, so in the short-term gold could go further.

Currencies

There is a small handful of currencies which investors tend to buy into when things look shaky.

The main ones are the Japanese yen and the Swiss Franc, although the US dollar can become a safe haven at times too.

As with bonds, however, port-in-a-storm currencies already look expensive, something you realise as soon as you try to buy literally anything in Switzerland.

Another problem is that currencies are unpredictable and volatile. Dealing in currencies is a specialism that most personal investors would be wise to avoid.

And if you try to play currencies by buying other assets like funds or shares then the movement of the underlying asset can easily offset any currency gain.

Cash

The ultimate safe haven.

Cash has one big advantage. You know exactly how much it is worth and what it will buy you, in your own country at least even if not on holiday.

Cash also has a major disadvantage at the moment.

Thanks to falling interest rates, it pays almost as little income as gold.

This means that in inflation-adjusted terms a cash investment is constantly going backwards.

 

Defensive stocks

Some types of shares move up and down less than others.

They are known as defensives and are to be found in the parts of the market which are least vulnerable to the economic cycle.

Even in a recession, people tend to continue eating and heating their homes. The companies that serve these basic human needs can be expected to deliver profits and dividends whatever happens in the outside world.

As with some of the other safe havens listed here, however, defensive shares have already priced in this big advantage.

Investors are paying a high price for their perceived security.

And no-one should think that defensive shares are immune to market downturns.

They will also fall, especially if they start out over-priced.

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