Safest Investment

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trope
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Safest Investment

Post by trope »

I am looking for something that investors would flock to in a global panic/market downturn. Traditionally US treasuries have been considered one of the safest investments. Is this still the case? I don't know if things are different now that interest rates are quite low and will probably stay low for the time being. Also perhaps the increasing US debt is causing some concern among investors.

Is there another country's sovereign debt that is worth considering (preferably easily accessible such as through an ETF)? Gold? Bitcoin? Another currency?

Regarding gold, the value is essentially aesthetic right? As it is not really used as a currency anymore and there are not many industrial applications.
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cheese_breath
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Re: Safest Investment

Post by cheese_breath »

Maybe the flock should consider staying the course.
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Uncle Pennybags
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Re: Safest Investment

Post by Uncle Pennybags »

trope wrote:I am looking for something that investors would flock to in a global panic/market downturn.
Have you considered shotguns and freezes dried food? Gold will be worth its weight in gold when that day comes.
alex_686
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Re: Safest Investment

Post by alex_686 »

US Treasuries are still considered to the be safest and most liquid asset out there.

Some points.

We are pulling inflation risk off the table.

We can argue if US Treasuries are as safe as they were 30 years go, or if they will be safe in 30 year years, but that misses the point. Even if Treasuries are more risky, they are still the safest out of all assets available today.

One can make the argument that there are assets out there that are just as safe as US Treasuries, but they lack the liquidity. I am thinking of Germany government debt here.

Gold is one of those irrational asset classes. There is no rational economic basis for its price - you need to rely on market psychology for that. I am not a gold bug, but I don't want to really get into that debate. What we can do is strike industrial uses of gold off of the list. Industrial usage has been around 15% for the past 50 years - boom, bust, high gold prices, or low - its usage has been more or less fixed, Price is set at the margin and industrial usage are far off the margin. They are price takers.
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blueblock
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Re: Safest Investment

Post by blueblock »

Uncle Pennybags wrote:
trope wrote:I am looking for something that investors would flock to in a global panic/market downturn.
Have you considered shotguns and freeze dried food? Gold will be worth its weight in gold when that day comes.
I was going to say the same thing re: food. In a global panic, just-add-water gourmet entrees with a 25-year shelf life might be just the ticket.

Marie Osmond explains: https://www.youtube.com/watch?v=3darvifN9oM

Wise Company Foods (MWIS:OTC US) can be had for the OTC price of 2/100's of a cent per share.

Also ammunition.

A little more seriously--but only a little--cash might work.
hicabob
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Re: Safest Investment

Post by hicabob »

Swiss debt perhaps? - the yield isn't very impressive though....
"The Swiss government became the first ever to auction off 10-year debt at a negative yield on Wednesday, as quantitative easing and deflation fears pushed up bond prices.
Sold at a yield of -0.055pc, investors bought 232.51m Swiss francs (£161.76m) of debt at a price that could mean they end up paying Switzerland’s government to hold their money. Investors will be hoping to offload the notes before they mature in 2025 if they wish to make a return."

http://www.telegraph.co.uk/finance/econ ... yield.html
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ruralavalon
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Re: Safest Investment

Post by ruralavalon »

I vote for Vanguard Short-term Treasury Fund (VFISX).
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Dutch
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Re: Safest Investment

Post by Dutch »

I Bonds ?
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grabiner
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Re: Safest Investment

Post by grabiner »

Another country's sovereign debt is not as safe an investment as US debt for you, because of currency risk. You can buy a 10-year Treasury bond today for $10,000 and be guaranteed $10,000 in ten years, plus some coupon payments. Even better, you can buy a 10-year TIPS today and be guaranteed the present purchasing power of $10,000 in ten years but with much lower coupon payments. If you buy a 10-year Euro bond today, you will get a fixed number of Euros in ten years, but you won't know whether that will be worth $5,000 or $20,000.

The safest investment today is a TIPS which matures when you need the money. For a retirement portfolio, the safest investment is a TIPS ladder, with payments coming every year for a known inflation-adjusted dollar value.
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john94549
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Re: Safest Investment

Post by john94549 »

Folks in serious panic mode might look to FDIC- or NCUA-insured CDs. Better rates than treasuries. Same backing by the Federal Government. The main problem is supply and demand. There's a ready market for Treasuries. Buy all you want. If folks start flooding into CDs, the door might close and rates might drop dramatically.

Generally speaking, it might be better to buy a CD here, and a CD there, rather than try to pile into CDs all at once.

That said, folks around the world tend to regard United States Treasuries the safest "port in the storm".
kiddoc
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Re: Safest Investment

Post by kiddoc »

Stock market panic: Treasuries as everyone has mentioned

Doomsday panic: Potable water (a bore-well or portable water filter could be a fantastic investment), freeze dried food, gold and cash hidden under the mattress :happy
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Uncle Pennybags
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Re: Safest Investment

Post by Uncle Pennybags »

kiddoc wrote:Doomsday panic: Potable water (a bore-well or portable water filter could be a fantastic investment), freeze dried food, gold and cash hidden under the mattress :happy
Doomsday panic sounds silly but Katrina showed how thin the veneer of civilization is. In that situation investments are not important.
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William4u
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Re: Safest Investment

Post by William4u »

IMHO, the safest long-term investment, given that inflation is one of the more serious threats to your savings, is 50% stock and 50% Bonds (which can include treasuries). The 50% stock should be entirely in total market index funds, ala a three fund portfolio.
http://www.bogleheads.org/wiki/Three-fund_portfolio

Nothing is 100% safe. You have to take some risks, and in avoiding one risk you may be taking on other greater risks.
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Watty
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Re: Safest Investment

Post by Watty »

A well diversified portfolio is the best defense since things might not work out the way that you expect and even if you are right, if you are five years too early that can be expensive too.
Dandy
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Re: Safest Investment

Post by Dandy »

One reason US Treasuries are yielding so little is that they are currently a major choice for safe haven investors.
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saltycaper
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Re: Safest Investment

Post by saltycaper »

trope wrote:I am looking for something that investors would flock to in a global panic/market downturn. Traditionally US treasuries have been considered one of the safest investments. Is this still the case? Yes. FDIC insured bank products, such as savings accounts and CDs, are also considered one of the safest places to put your money. I don't know if things are different now that interest rates are quite low and will probably stay low for the time being. They are one of the safest investments because of their liquidity and assumed 0% chance of default. There is still interest rate risk. Also perhaps the increasing US debt is causing some concern among investors. I don't think this is a significant concern at this time or in the foreseeable future.

Is there another country's sovereign debt that is worth considering (preferably easily accessible such as through an ETF)? Not if you are in the US, earning US dollars, and saving and investing US dollars, due to currency risk. Gold? Some would question if this is even an investment. Liquidity can pose a significant issue. Bitcoin? Speculative. Another currency? Currencies can be very volatile.

Regarding gold, the value is essentially aesthetic right? To me, yes. As it is not really used as a currency anymore and there are not many industrial applications. Gold is still used in industrial applications, but relative to other metals, I think you're correct--not as many.
You may be interested to read about TIPS,a type of treasury security with inflation protection, here: https://www.bogleheads.org/wiki/Treasur ... d_Security
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NYCwriter
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Re: Safest Investment

Post by NYCwriter »

(I'm newly registered, but been occasionally reading for a long time).

I have cash parked in highest-yield ladder CDs. I was about to add Admiral's VITAX when the correction hit and have held off on pushing the button, but I'm not that worried. I'm considering VTIP or other TIPS as well.

I was living in lower Manhattan when Sandy hit, and the 'hood got flooded. One week without power, pitch back apartment building, no elevators in my high building, grocery stores shut down or cleared out, and no working juice below 36th St to power anything. We all got offered boxes of MREs. 1800 calorie meals with 60% daily sodium, but I guess they'll keep you alive? I still keep a case of water stashed in my apt. Small bills, lots of little led flashlights, and some books for when your phone dies and you really freak out.

But nothing compared to Katrina or wildfires/floods. If its zombies, I'm dinner anyway and my 4-fund portfolio won't save me.
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trope
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Re: Safest Investment

Post by trope »

Thanks, very thoughtful and edifying responses, will need to take some time to consider it.

To clarify, I was referring to a market crash such as 2008, 1999, and so on, not armegeddon/doomsday scenarios, but they are risks and the responses are interesting.

If I was to ignore currency risk, are there other options? I think Swiss and German debt were mentioned, what currencies would be options? I think I recall the Japanese Yen did really well (vs. USD) during the 2008 worldwide crash but I don't remember why it happened.
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VictoriaF
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Re: Safest Investment

Post by VictoriaF »

trope wrote:I am looking for something that investors would flock to in a global panic/market downturn.
Dutch wrote:I Bonds ?
I Bonds are safe but they are not flockable. TIPS are more suitable.

Victoria
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nisiprius
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Re: Safest Investment

Post by nisiprius »

I don't think it's realistic to suppose that there is some cheap easily obtained magic shield of invulnerability in a financial crisis. Certainly not things you can get by just clicking on a "buy" button on your favorite brokerage's website.

I also think that predictions are unreliable. I distrust all statements that contain the phrase "tends to" (when X happens, investment Y tends to do Z).

Almost by definition, financial crises are unique. If they were similar to things that had gone before, the financial community would know how to head them off.

In crises, stuff happens. One of the commonest kinds of stuff is that countries will institute restrictions on transborder flow of things. There may be kinds of currency controls. There may be restrictions on private ownership of gold.

What the heck was Venezuela doing just recently? Three different exchange rates of bolivars for dollars depending on what you were going to buy with them, or something?

http://jamaica-gleaner.com/article/news ... uote]There are four different rates of exchange, if you count the illegal black market. Venezuela's government sells dollars for 6.3, 12 and 172 bolivars per dollar. The first two rates are used for imports of government-authorised priority goods, including food, medicine and car parts. The third rate, introduced on February 12, can be used by anyone who does not receive authorisation to buy dollars at the first two preferential rates. On the black market, US$1 currently fetches about 190 bolivars.[/quote]
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wannabeteacher
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Re: Safest Investment

Post by wannabeteacher »

This may not be to the point. The safest investment is invest in your fortitude and stay put.

I am new here and already I am having fun and learning as well as reinforcing beliefs/concepts.

I retired about 2 yrs ago and have been very nervous about managing my life time savings. I had vague idea as to
what TIPS are and recently I have bought about 40 K since January maturing years 2021 thru 2025. 10 k more to go
to complete two each per year. they have gone down since I bought them but I keep reminding myself that I bought them
for inflation protection yrs 2021 thru 2025 and nothing else. I have a feeling that concept is right and that experienced
and knowledgeable members on forum would rubber stamp me.

Sorry did'nt mean to badge in on somebody else's post.
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Re: Safest Investment

Post by The Wizard »

NYCwriter wrote:(I'm newly registered, but been occasionally reading for a long time).

I have cash parked in highest-yield ladder CDs. I was about to add Admiral's VITAX when the correction hit and have held off on pushing the button, but I'm not that worried. I'm considering VTIP or other TIPS as well.

I was living in lower Manhattan when Sandy hit, and the 'hood got flooded. One week without power, pitch back apartment building, no elevators in my high building, grocery stores shut down or cleared out, and no working juice below 36th St to power anything. We all got offered boxes of MREs. 1800 calorie meals with 60% daily sodium, but I guess they'll keep you alive? I still keep a case of water stashed in my apt. Small bills, lots of little led flashlights, and some books for when your phone dies and you really freak out.

But nothing compared to Katrina or wildfires/floods. If its zombies, I'm dinner anyway and my 4-fund portfolio won't save me.
Good point about the zombies...
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Kevin M
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Re: Safest Investment

Post by Kevin M »

trope wrote: To clarify, I was referring to a market crash such as 2008, 1999, and so on, <snip>
In the two most recent, large, stock market declines, long-term Treasuries did the best, but that does not necessarily make them "safe". If interest rates increase much, you could lose a fair amount in long-term Treasuries. Also, in all but the two most recent calendar year declines, 3-month Treasuries did as well or better than 10-year Treasuries when stocks dropped by 10% or more.

TIPS did not do well in 2008, so if you are looking for flight-to-safety hedge, they may not be the way to go. But as pointed out, they are safe from the perspective of matching real liabilities.

Kevin
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Re: Safest Investment

Post by Grt2bOutdoors »

VictoriaF wrote:
trope wrote:I am looking for something that investors would flock to in a global panic/market downturn.
Dutch wrote:I Bonds ?
I Bonds are safe but they are not flockable. TIPS are more suitable.

Victoria
In taxable accounts?
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staythecourse
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Re: Safest Investment

Post by staythecourse »

The best course of action is to do nothing.

If you need something to do on this Friday go to the pub, open your wallet or purse, and buy a drink. I bet if one did a study that approach would yield better returns over every 20 yr. period then every other strategy put together.

Good luck.
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VictoriaF
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Re: Safest Investment

Post by VictoriaF »

Grt2bOutdoors wrote:
VictoriaF wrote:
trope wrote:I am looking for something that investors would flock to in a global panic/market downturn.
Dutch wrote:I Bonds ?
I Bonds are safe but they are not flockable. TIPS are more suitable.

Victoria
In taxable accounts?
Nope. But of course, you knew the answer.

Victoria
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john94549
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Re: Safest Investment

Post by john94549 »

staythecourse wrote:The best course of action is to do nothing.

If you need something to do on this Friday go to the pub, open your wallet or purse, and buy a drink. I bet if one did a study that approach would yield better returns over every 20 yr. period then every other strategy put together.

Good luck.
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Phineas J. Whoopee
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Re: Safest Investment

Post by Phineas J. Whoopee »

I know OP eventually specified a stock downturn, but more generally, even to talk about safest requires a definition of the risks one wants to be safe from. Many contradict each other, so there is no safest that applies to all people all the time.

There is the Modern Portfolio Theory concept of the risk-free rate, but it's only a hypothetical construct, like a frictionless plane or a vacuum tube that does it's job from the moment current is first applied. In order to perform MPT calculations one has to plug in something for the risk-free rate, so typically T-bills are used, but that's only by convention.

My own situation and portfolio, which I've posted about extensively, in my own analysis are most at risk from compounded inflation over the long term, so an important input to my asset mix is mitigating that. There are also other risks I take account of. It's within the realm of possibility that something I didn't think of, or even something I did think of but judged to be of too little magnitude or likelihood to do anything about, will destroy me.

On the other hand, later today I could be run over by a bus.

There's safety, and then there's safety.

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StormShadow
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Re: Safest Investment

Post by StormShadow »

Your career.
dh
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Re: Safest Investment

Post by dh »

StormShadow wrote:Your career.
+1
... and Victoria's suggestion of I-bonds in taxable accounts.
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William4u
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Re: Safest Investment

Post by William4u »

StormShadow wrote:Your career.
Phineas J. Whoopee wrote:My own situation and portfolio, which I've posted about extensively, in my own analysis are most at risk from compounded inflation over the long term, so an important input to my asset mix is mitigating that.
Yup & yup! Invest in your education and power to earn. A physician will always eat, even if the world goes "Mad Max" on us! :wink:

And, as I mention above, one of the safest long-term investments, given that inflation is one of the most serious threats to your savings, is a portfolio of 50% stock and 50% Bonds in a three fund portfolio.
http://www.bogleheads.org/wiki/Three-fund_portfolio

In over-reacting to one risk (short-term market turbulence), you may exacerbate another greater risk (e.g., long-term compounded inflation). I would build a sensible career and invest according to the basic principles of Modern Portfolio Theory.
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Bustoff
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Re: Safest Investment

Post by Bustoff »

trope wrote:I am looking for something that investors would flock to in a global panic/market downturn.
The financial crises of 2008-2009 should meet your "global panic/market downturn" scenario because there were tremendous numbers of "investors" who actually did panic and flocked to cash, selling at lows and suffering a permanent loss of capital.
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Meaty
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Re: Safest Investment

Post by Meaty »

Uncle Pennybags wrote:
kiddoc wrote:Doomsday panic: Potable water (a bore-well or portable water filter could be a fantastic investment), freeze dried food, gold and cash hidden under the mattress :happy
Doomsday panic sounds silly but Katrina showed how thin the veneer of civilization is. In that situation investments are not important.
This. People joke about collapse of rule of law like it hasn't happened in generations. Few would argue it would collapse permanently but there are MANY examples from the U.S. in the last decade or so where it collapses in a significant and relatively long term way. (LA riots, Katrina, Baltimore, ferguson)

Don't be fooled into thinking someone (police, fire, etc) will always be 2 min away to help you
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William4u
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Re: Safest Investment

Post by William4u »

Meaty wrote:
Uncle Pennybags wrote:
kiddoc wrote:Doomsday panic: Potable water (a bore-well or portable water filter could be a fantastic investment), freeze dried food, gold and cash hidden under the mattress :happy
Doomsday panic sounds silly but Katrina showed how thin the veneer of civilization is. In that situation investments are not important.
This. People joke about collapse of rule of law like it hasn't happened in generations. Few would argue it would collapse permanently but there are MANY examples from the U.S. in the last decade or so where it collapses in a significant and relatively long term way. (LA riots, Katrina, Baltimore, ferguson)

Don't be fooled into thinking someone (police, fire, etc) will always be 2 min away to help you
All these examples of the failure of rule of law are from places in the U.S. where inequality is at its extreme. Some of those places have statistics (e.g., infant mortality, life expectancy) that are more similar to developing countries than developed ones. So if the OP lives in a place where inequality is at its extreme, then preparing for the 1% chance of a few weeks of lawlessness seems more reasonable.
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Uncle Pennybags
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Re: Safest Investment

Post by Uncle Pennybags »

William4u wrote:All these examples of the failure of rule of law are from places in the U.S. where inequality is at its extreme.
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Meaty
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Re: Safest Investment

Post by Meaty »

William4u wrote:
Meaty wrote:
Uncle Pennybags wrote:
kiddoc wrote:Doomsday panic: Potable water (a bore-well or portable water filter could be a fantastic investment), freeze dried food, gold and cash hidden under the mattress :happy
Doomsday panic sounds silly but Katrina showed how thin the veneer of civilization is. In that situation investments are not important.
This. People joke about collapse of rule of law like it hasn't happened in generations. Few would argue it would collapse permanently but there are MANY examples from the U.S. in the last decade or so where it collapses in a significant and relatively long term way. (LA riots, Katrina, Baltimore, ferguson)

Don't be fooled into thinking someone (police, fire, etc) will always be 2 min away to help you
All these examples of the failure of rule of law are from places in the U.S. where inequality is at its extreme. Some of those places have statistics (e.g., infant mortality, life expectancy) that are more similar to developing countries than developed ones. So if the OP lives in a place where inequality is at its extreme, then preparing for the 1% chance of a few weeks of lawlessness seems more reasonable.
How about Chicago? More people are shot there every weekend then some war zones (seriously, summer of 2005 there were more shootings in Chicago than Iraq)
Inequality is an issue everywhere in the US
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William4u
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Re: Safest Investment

Post by William4u »

Meaty wrote:
William4u wrote:
Meaty wrote:
Uncle Pennybags wrote:
kiddoc wrote:Doomsday panic: Potable water (a bore-well or portable water filter could be a fantastic investment), freeze dried food, gold and cash hidden under the mattress :happy
Doomsday panic sounds silly but Katrina showed how thin the veneer of civilization is. In that situation investments are not important.
This. People joke about collapse of rule of law like it hasn't happened in generations. Few would argue it would collapse permanently but there are MANY examples from the U.S. in the last decade or so where it collapses in a significant and relatively long term way. (LA riots, Katrina, Baltimore, ferguson)

Don't be fooled into thinking someone (police, fire, etc) will always be 2 min away to help you
All these examples of the failure of rule of law are from places in the U.S. where inequality is at its extreme. Some of those places have statistics (e.g., infant mortality, life expectancy) that are more similar to developing countries than developed ones. So if the OP lives in a place where inequality is at its extreme, then preparing for the 1% chance of a few weeks of lawlessness seems more reasonable.
How about Chicago? More people are shot there every weekend then some war zones (seriously, summer of 2005 there were more shootings in Chicago than Iraq)
Inequality is an issue everywhere in the US
There is a neighborhood in Chicago's West Side that is the 24th most dangerous neighborhood in the U.S. If you live there, there is a 1 in 17 chance of your being a victim of violent crime this year.

There are even worse neighborhoods in Memphis, TN, Camden, NJ, Pittsburgh, PA, Houston, TX, and Baltimore, MD in which the odds are 1 in 11.
http://www.neighborhoodscout.com/neighb ... hborhoods/

Those cities are in general perfectly safe to live in for most everyone, except the people who live in those neighborhoods with elevated risks. Inequality isn't everywhere. Inequality is concentrated in specific neighborhoods in many cities that are otherwise safe. The LA Riots, for example, did not put any of the well-to-do neighborhoods at risk.

The U.S. is somewhat unique in this respect, having one of the highest rates of inequality and child poverty in the democratic, developed world. There are neighborhoods in the U.S. that have infant death rates similar to some of the poorer countries on earth. This is not true of Western Europe.
http://web.stanford.edu/group/scspi/cgi-bin/facts.php
https://en.wikipedia.org/wiki/Income_in ... ted_States
http://money.cnn.com/2015/05/21/news/ec ... ries-oecd/
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Toons
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Re: Safest Investment

Post by Toons »

Personally I wouldn't "flock" to anything.
I never have been much of one to react to "noise". :happy
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sawhorse
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Re: Safest Investment

Post by sawhorse »

alex_686 wrote:US Treasuries are still considered to the be safest and most liquid asset out there.
...
One can make the argument that there are assets out there that are just as safe as US Treasuries, but they lack the liquidity. I am thinking of Germany government debt here.
For Americans, things backed by the US government are safer. For Germans, things backed by the German government are probably safer.

If a government in a truly democratic country (not countries that are democratic on paper but the results are completely rigged) has to partially default, usually people in that country will get payment priority. The political fallout would be too severe otherwise.

So in terms of safest investments for Americans, I bonds, FDIC insured bank assets, and individual Treasury bonds that you hold to maturity (not bond index funds which can lose money due to interest rate changes) are the way to go.
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Re: Safest Investment

Post by alex_686 »

sawhorse wrote:
alex_686 wrote:US Treasuries are still considered to the be safest and most liquid asset out there.
...
One can make the argument that there are assets out there that are just as safe as US Treasuries, but they lack the liquidity. I am thinking of Germany government debt here.
For Americans, things backed by the US government are safer. For Germans, things backed by the German government are probably safer.
Maybe not. The German market is much smaller. During the first Greek crisis money flocked to Germany, creating a big imbalance in balance in the market. This severally pushing down the price of government bonds. If you had German bonds and needed to get out you would have had to pay a steep price.

The same effect hit America but to a much lesser extent - the US market is much more liquid. A German would have been better off buying US Treasuries and then entering into a FX futures contract to hedge away FX exposer.

As for safe asset, the OP was referencing international markets with huge flows of money, so I assumed we are talking about market forces here. FDIC insured accounts are not a good vehicle if one needs to hold a couple of million in cash for a short period of time.

FYI, this is the same reason why I don't consider TIPS to be a "Safe Asset". The supply and trading in TIPS is limited - at times one has to pay a hefty liquidity premium to trade in and out of these assets. "Safe Assets" for me has to have a high degree of liquidity. TIPS are a low risk assets. This just may be semantics, but isn't semantics part of the reason why were are here? :happy
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
jpfern15
Posts: 21
Joined: Thu Jan 22, 2015 9:55 pm

Re: Safest Investment

Post by jpfern15 »

Global panic bump. Do the suggestions in this thread still apply? What is the safest possible investment fund?
alex_686
Posts: 13286
Joined: Mon Feb 09, 2015 1:39 pm

Re: Safest Investment

Post by alex_686 »

Still the US.

The reason why there is so much volatility with treasuries is because money is piling in because it is seen as the safest assets - the gold standard / reserve currency of the world.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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