The Best 5 Value Stores For Volatile Times
When the markets are volatile, prudent investors look to hedge against it. Wildly fluctuating currencies, drastic monetary policy, political turmoil, unpredictable commodity prices and general economic upheaval tend to hurt interest rates and asset prices. Parking and protecting your capital can be difficult, and so anything that offers you predictability and some protection against the craziness is welcome. Below are the best 5 value stores for tumultuous times.
Gold has long been recognized as an important value store and inflation hedge during volatile times, especially when currency markets are unpredictable and domestic currencies run the risk of rapid inflation. This is because gold has a variable price in USD, so should the dollar depreciate, the cost of an ounce of gold will rise.
While the effectiveness of gold as an inflation hedge over the short and medium-term is controversial, gold is usually considered a vital component of a well-diversified portfolio and a good value store over the long-term. Gold retirement accounts, for example, are popular for retirees looking for tax breaks on their retirement planning and savings.
The idea of cryptocurrencies like Bitcoin and others acting as reliable stores of value is highly controversial, but there are well-considered opinions on either side of the debate. Those who disagree that cryptocurrencies could ever act as a good store of value point to the historical volatility.
Those taking a more optimistic view of crypto’s storage potential point to its inability to be confiscated. That is to say, no government entity can come in and take your cryptocurrencies in the same way they can with your other assets like fiat money, real estate, equities etcetera.
Treasury Bonds from large economic powerhouse countries have historically been one of the most predictable and stable stores of value. While the number of new asset classes has exploded over the last three or four decades, traditionally, if you wanted to protect your capital and were highly risk-averse, you put it in something like a U.S. Treasury Bond.
This is because the U.S. (and economic regions like the EU) has historically been viewed as a highly credit-worthy (perhaps the most credit-worthy) country, with little to no risk of default. This reputation has changed throughout the 21st century and 10-year yields are now at historic lows.
Guaranteed Investment Contracts (or Guaranteed Investment Certificates in Canada), are investment vehicles provided by banks that let you invest your money at a fixed rate of return over a fixed period of time in exchange for agreeing not to touch the money. You put money into a GIC for two to five years, the bank has guaranteed access to that capital, and you receive an interest payment.
GICs are certainly not going to make you rich, but they do offer good protection from plunging interest rates and eroding value in the market. They are highly conservative, but also highly safe.
Precious gems like diamonds, rubies, sapphires, emeralds and the like are popular investment vehicles (usually for wealthy people) because gems are scarce commodities in high-demand. Many of these stones, and particularly the coloured ones, have a historical price trend lines that have grown exponentially.
The biggest barrier to entry for gemstone investing is the knowledge required to safely navigate the market without being swindled. You have to know how to correctly examine and evaluate a stone and you have to know how and where to sell gems and how to maximize the liquidity of your asset.
Any investor looking at their portfolio at this particular point in history has to be wondering what they can do to protect any gains they have made and minimize any future losses they might incur given their current diversification strategy. The market is reacting favorably to coronavirus vaccination efforts, but the economic fallout from 2020 is going to be severe over the long-run. Value stores, like the kind mentioned above, will be a necessary component in any prudent investor’s strategy for quite some time.