Although the S&P 500 has been doing well this year and is up around 9% thus far, tracking the index may not be the safest-looking option given its heavy exposure to top tech stocks, such as Nvidia and other tech giants. For risk-averse investors, the need may be to find something safer to invest in, especially if you’re worried about the direction of the economy and a tech bubble bursting in the near future.
Gold, silver, Bitcoin, and dividend stocks all offer intriguing options for diversification. And investors have at times turned to these investments in an effort to reduce risk. But which one of these options is the best one today, if your goal is to find a quality, safe-haven investment to put your money into right now? Let’s take a look.
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Gold is the classic go-to option for risk-averse investors
When the economy is in a downturn or investors are worried about the future, gold is usually in high demand. In 2020, amid the early stages of the pandemic, the price of gold rose by 25%. However, in 2022, when interest rates were rising, its performance was flat. That’s because when rates are high, it’s easier for investors to get a good return from other investments, and gold becomes less attractive.
Gold is largely a speculative investment as its value isn’t tied to earnings or revenue the way a typical stock is. It can be a good store of value, but not much else. This year, with interest rates potentially rising higher, gold may be destined to rise even lower. It can still be a good option for long-term diversification, but I don’t think it’s the best safe-haven asset given the current economic conditions.
Silver is another precious metal that’s been popular with retail investors of late
Silver is not unlike gold in that it can be an effective way to diversify. Demand for silver may also rise higher due to the ongoing build-out of data centers for artificial intelligence (AI). It’s more of an industrial metal than gold, and thus, has more of a compelling investment case than gold in that sense.
The iShares Silver Trust, which tracks silver prices, has risen by 80% in the past year due to the sharp increase in silver. While the price has been falling recently, retail investor interest over the past year suggests it could spike again if there are renewed concerns about the economy.