What it is
In investing, a safe haven is the term for an asset which is expected to maintain or even grow its value when the market isn’t doing well.
While there aren’t any standard safe havens, in the past precious metals (such as gold), cash, and some currencies and stocks have been considered to fall under this classification.
Usually, safe havens have low or even no correlation to the market in general. This allows them to stay relatively unaffected or even rise in value when many other assets are falling.
What it means for you
Having some safe havens in your portfolio can help you manage your risks and help you when you diversify. Remember though that there are no assets which have been proven to be always “safe.”
In times of market trouble, you’ll have to do your research to see which assets can be considered safe. You should consider the particular nature and cause of the difficulty, and then determine which assets are likely to remain unaffected or grow.
Remember also that while safe havens have their advantages, they may not be the best investments to have when the market is on an upswing. That’s because they might not have the growth potential of investments which would be less “safe” when times are difficult.
