Expert Chaslau Koniukh
  • Companies
  • Global investment
  • Investors
  • Terminology
  • Economy
  • Stock Market
  • World exchanges
  • Tech and Marketing
protective assets
Market terminology

Protective assets as an important portfolio diversification tool

30.01.2025
2 min read

An overview of the different types of protective assets

Geopolitical instability and economic difficulties are prompting more and more investors to turn to protective assets. This instrument helps to protect capital in times of uncertainty and crisis in the global market.

Instrument features

Safe-haven assets are financial instruments whose value does not fall in times of crisis or even rise. Such assets help to reduce risk in the event of falling market indices or economic instability. It is essential to recognise that not all hedging instruments are equally effective in different market conditions. The choice of a particular instrument depends on the investor’s objectives.
As far as the characteristics of these financial instruments are concerned, they share the following features:
1. Liquidity. These assets can be easily sold at any time.
2. Stability. The price of a protective asset remains stable or rises over time, regardless of economic fluctuations.
3. Irreplaceability. Assets are always relevant, regardless of market conditions.
4. Limitability. The increase in supply cannot exceed the demand for the instrument.
Over time, one type of asset may replace another. This is why it is crucial to analyse the market and assess trends before investing. However, experts have highlighted instruments that can almost always be considered protective. These include:
– government bonds;
– US currency;
– gold;
– Swiss national currency;
– Japanese national currency.protective assets gold

Investment options

Gold is the most popular investment in times of crisis. This asset has proven its stability throughout history. In addition, central banks have chosen gold as a tool to reduce inflation risks.
The price of gold tends to rise during market downturns. When stock markets fall, investors actively diversify their portfolios, making gold an attractive investment again. The high demand for the metal with limited reserves helps to increase its value further.
Another safe haven is government bonds. Investing in bonds is effectively borrowing from the government. The government guarantees the payment of interest and repayment of the nominal value after a set period. Bonds issued by countries with highly developed economies are considered virtually risk-free. Such countries traditionally include the US and the UK. These countries provide investors with reliable financial instruments, especially in unstable times.
The dollar has been the world’s reserve currency since 1944, which indicates the confidence placed in it. It is also the most liquid currency in the world. In global markets, most goods are priced in dollars, making the US currency an excellent safe-haven asset.
The Swiss franc has made it onto this list because of the stability of the country’s management system. In addition, the state always maintains a status of political neutrality. This reduces the risk of economic fluctuations.
Japan has been described as the world’s largest creditor. This status is due to the government’s preference for transferring capital to foreign assets. However, during periods of instability, Japanese investors transfer foreign funds into the local currency, strengthening the yen.

Tags: Market terminology
0
Previous Post India's steel demand encourages producers to increase capacity Next Post History of the Swiss watch brand Longines

You Might Also Like

a margin requirement
Market terminology
Margin requirements for the stock market: essence of the concept
07.07.2020
Inverted hammer
Market terminology
Inverted Hammer: characterisation of the candlestick pattern
19.03.2025
SK-FX trading strategy
Market terminology
SK-FX trading strategy: peculiarities of tactics for working on the market
29.02.2024
cloud gap pattern
Market terminology
Cloud gap pattern as one of the methods for determining market trends
26.10.2024
How to fill in the investment declaration
Market terminology
How to fill in the investment declaration: detailed instructions
14.11.2020
short and long position
Market terminology
Short and long position on the stock exchange and their application in trading activities
19.12.2021

Popular Posts

  • Spain’s economy performs best in the EU
  • Li Ka Shing: How can success be achieved without money and education?
  • Skolkovo analysts: the Russian energy market is suffering losses
  • Ingeborg Mootz: a woman who became a stock player at the age of 75

Editor's Picks

Chaslau Koniukh
Analytics

American bankers from JPMorgan and Goldman Sachs advise to invest in gold: review by Chaslau Koniukh.

Press Secretary
17.08.2020
Expert Chaslau Koniukh
Analytics

Chaslau Koniukh on the analysts’ opinion on the key stake size change soon

Press Secretary
18.06.2020
expert Chaslau Koniukh
Analytics

Chaslau Koniukh: Internet trade market in Russia may reach 2.78 trillion rubles.

Press Secretary
30.05.2020
Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh
Analytics

Will the U.S. oil shale industry be able to quickly recover from the crisis: A Review by Chaslau Koniukh

Press Secretary
16.05.2020

Popular Posts

  • Spain’s economy performs best in the EU
  • Li Ka Shing: How can success be achieved without money and education?
  • Skolkovo analysts: the Russian energy market is suffering losses
  • Ingeborg Mootz: a woman who became a stock player at the age of 75
  • Analysts: Egypt’s economy to continue falling in 2023
Expert Chaslau Koniukh
  • Facebook
  • Twitter
  • Instagram

© 2024 CHASLAU KONIUKH. ALL RIGHTS RESERVED. Expert in marketing and project management, international investments, financial analyst.

Menu

  • Biography
  • Companies and corporations
  • Global investment
  • Investors and Entrepreneurs
  • Economy
  • Market terminology
  • Stock Market
  • World exchanges
  • Tech and Marketing
  • Analytics