What is a safe-haven investment?

Fans of bitcoin say it trumps gold as a safe-haven asset, so Morningstar analysts have created a framework to determine what a safe-haven investment is.

Kristoffer Inton 13 September, 2018 | 5:00PM

Amid their meteoric price rises of 2017, bitcoin and other cryptocurrencies garnered mainstream attention and legitimacy as an asset class. Some went so far as to posit the idea that cryptocurrencies could replace traditional forms of currency or assets, including gold.

As a first step in determining whether cryptocurrencies should be considered safe-haven assets, we need to define what safe-haven assets are. For our purposes, we classify an asset as a safe haven if it holds, or even increases, its value during periods of market and economic uncertainty and downturns. The asset should preserve capital, withstand market volatility, and provide diversification across a portfolio.

Many asset classes have traditionally been considered safe havens. This list includes gold and other precious metals, industrial commodities, agricultural commodities, currencies, real estate, consistent dividend stocks, and US Treasury bonds.

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About Author

Kristoffer Inton

Kristoffer Inton  Kristoffer Inton is an equity analyst for Morningstar, covering gold, coal and cement companies. Before joining Morningstar in 2013, he was an investment banking associate for Guggenheim Securities in New York. He holds a bachelor’s degree in finance with high honours from the University of Illinois.

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