Gold, inflation-linked bonds, defensive stocks, real-estate investment trusts (REITs), and money markets are the best places to put your money to protect your wealth during volatile times.
Momentum Securities equity analyst Faheema Adia said that global stock markets had experienced significant volatility this year.
High inflation, rising interest rates, and geopolitical tensions have contributed to markets plummeting in 2022.
The S&P 500 is down 24% this year, while the JSE all-share index is also down significantly from its high.
Adia expects things to get worse before they get better, given that several central banks worldwide have begun to aggressively hike interest rates to cool elevated inflation levels.
There are also expectations of a global slowdown and recession, which will put further pressure on companies.
It raises the question of where people can invest in safeguarding their money and limiting their losses.
Adia gave a few options which are seen as safe havens during times of uncertainty and volatility.
Gold is seen as a hedge against inflation and volatility. It is down from its previous highs, as it does not yield any interest amidst an environment that offers alternative high-yield investment options.
It is still considered a safe store for money in volatile climates and, therefore, a commodity Momentum Securities recommends investing in for some safety, especially considering that the rand has weakened to over R18 to the dollar.
Another option Momentum Securities recommended is to invest in inflation-linked bonds.
The coupon payment of these bonds is linked to inflation and therefore protects investors during inflationary environments.
As a small investor, there are several bond exchange-traded funds (ETFs) available that you could invest in locally and globally.
In terms of equity, the best place to be positioned, in our view, is in the defensive sector.
This sector is likely to fair better in difficult times. It includes non-discretionary consumer goods, healthcare and pharmaceuticals.
Real-Estate Investment Trust (REIT)
Another option is to invest in a Real-Estate Investment Trust (REIT), which is a good way to get exposure to the property sector without the drawbacks of investing directly in property.
Momentum Securities likes REITs because they are more liquid and have lower transaction costs than direct property investments.
Their REITs of choice are the Vukile Property Fund, which is focused on townships and rural retail, and Storage Property Reit, which has exposure to South Africa and UK growth.
Finally, Momentum Securities’ advised you to have a portion of your portfolio in a money market account, which is considered safe with yields linked to prime rates.
We recommend these asset classes to help protect your wealth during difficult market conditions.