How smart investors respond to uncertainty

There are a growing number of Wall Street veterans who are coming out to publicly warn against risky assets at a time of global turmoil. Many big players are advising investors to reduce risk, and avoid emerging-market bonds, stating that they feel that many stocks are overvalued and now is the time to reduce risk to protect wealth.

Ray Dalio, the Founder of Bridgewater Associates, even compared the current situation as similar to two years before the start of World War 2 and said he was not encouraged by the state of the World and the high potential for conflicts. In response to this concern, he is tactically reducing risk and advising investors to do the same. There’s an interesting article about the Wall Street veterans warning against risky assets on Investment News, which quotes some very big hitters and shares their concerns.

Minimise Risk with a Safe Haven Investment

After North Korea’s controversial test of a hydrogen bomb at the beginning of September, the market reacted by looking for low risk, or safe haven investments. Safe haven investments are investments which are expected to hold their value, or even increase in value in times of turbulence. There is no doubt that now is a time of turbulence and although the market calmed after the bomb test, the doubts around Brexit and how Trump’s presidency will play out have smart investors looking very carefully at safe haven options and how to diversify and minimise risk in their portfolio.

Gold is the classic safe haven investment and so it came as no surprise that the price of bullion was up 0.8%, close to a 12 month high, following the bomb test and President Trump’s aggressive response. However, gold is not the only option available.

When looking for safe investments, look at options outside of stocks and bonds, as these may protect against inflation and offer diversification. Commodities are the classic safe haven investment, as they are hard assets, which typically do not respond in the same way as the market, plus commodities are things you can own and will always be in demand. There are four main categories of commodity – Agriculture, Livestock, Metals and Energy. These play an important role in our daily lives and demand will grow as the population increases and economic development in India and China continues apace.

One very interesting commodity to explore is lumber or timber, which had its first commodities contract in 1969 and continues to be seen as an excellent way to reduce portfolio risk. There are many reasons why investing in forestry and the commodity of timber makes sense, but one of the most important when looking at this as a long term investment is the increasing demand and limited supply. According to the UN, the demand for timber in 2050 will be double that of today, as wood is such a versatile material and can be used for fuel, building, furniture and paper. There is particular demand from China and India’s rapidly growing population and there are predictions of a major timber shortage in the not too distant future.

Due to the relatively long production cycle for trees, from planting to harvesting, and the rapidly increasing demand, prices of timber will inevitably go up, making this an excellent long term investment. By investing in forestry now, you can also help to ensure that future generations will have the timber they need and be an ethical investor knowing that as your trees grow they will lock away tonnes of C02 and reduce pollution and global warming.

We have developed tax efficient turnkey investments based around forestry in Uruguay, a stable location which is perfect as an offshore investment hub, as well as having ideal climate and soil conditions for forestry. Our plantations grow Eucalyptus as they give the highest yields and grow quickly, reaching harvestable size in as little as eight years. Find out more about our forestry investments by browsing our website, downloading our guide or contacting one of our financial experts to discuss your needs.

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