From uncertainty over the war in the Middle East to fears of an AI bubble, there's a lot to worry investors right now.
Some might be tempted to give up and add their money to the £12bn that flowed into cash Isas in April this year alone, the second-highest monthly amount on record, according to the Bank of England (BoE).
But with the cash Isa allowance set to be cut, and the BoE predicting inflation will rise, there are compelling reasons not to cash out.
Instead, you might be tempted by 'safe haven' investments, from gold to defensive stocks to money market funds.
Here, we run through the pros and cons of these assets and ask what 'safe' means for investing.
Please note that this article is for information purposes only and does not constitute advice. Please refer to the particular terms and conditions of an investment platform before committing to any financial products.
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Can an investment ever be safe?
When you invest your money, you take on some risk that you won't get back everything you put in. Even cash savings carry their own type of risk: while you won't lose what you put in, your money can lose value over time due to inflation.
Not all investments are equally risky. If you invest in a new type of crypto, for example, there's a greater risk that your investment could lose all its value.
You might take on more risk for the prospect of higher returns, but for many, a lower-risk approach will be the better choice.
Investing your money in the long term (generally regarded as five years or more) across a broad range of investments won't make you immune to losses, but it can reduce the risk of losing what you put in.
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What are typical 'safe' investments?
Some investments have been relied on as a buffer against challenging stock markets, but these carry their own downsides.
Gold
The price of gold surged to record highs at the beginning of this year, and can appeal to investors hoping to dodge shocks of inflation that hit stocks.
Bola Onifade, portfolio manager at investment platform JP Morgan Personal Investing, explains: ‘Economic fears and uncertainty can often lead to a "flight to safety", meaning investors move into assets they perceive as less risky like gold, which holds an intrinsic value and was previously used as a form of currency.
‘That said, gold does not always go up during periods of global volatility and crisis as we have seen recently.'
The war in the Middle East wound back some of the increases in the price of gold, and in March, gold lost 14% of its market value.
Whether or not you believe it carries long-term intrinsic value, in the short term you should be comfortable with considerable price swings.
With reliable fixed income and steadier prices, bonds attract a more risk-averse crowd.
The risk varies depending on the creditworthiness of the bond's issuer. Government bonds from countries such as the UK and US carry a low risk of defaulting.
Hal Cook, senior investment analyst at investment platform Hargreaves Lansdown, says: ‘The "classic" playbook during periods of market stress – sell shares and buy government bonds – makes the safe-haven characteristic somewhat self-fulfilling.
‘If enough people sell shares and buy bonds at the same time, it improves the outcome, encouraging more people to do it again in future market wobbles.’
However, the once-established pattern of bonds rising as stock markets fall has been shaken in recent years. Bond and share prices have both fallen together in recent months, and most notably in 2022 amid massive spikes in inflation.
Some investors like to put money into shares of companies that will be needed regardless of what state the economy is in. This could be utilities such as gas and water, or consumer staples that sell essentials.
But Dan Coatsworth, head of markets at investment platform AJ Bell, says: ‘It’s important to understand that none of them are guaranteed to provide full protection during a market downturn. This was illustrated by share price movements as the Middle East crisis unfolded, with none of these areas immune from the market pullback.'
Money market funds take on a small amount of risk as they buy short-term debts from governments or companies that have high credit ratings.
Investors often use them as they might use cash, as they're low-risk and easily accessible.
The return is small and similar to that of higher-paying savings accounts, as they aim to match, or slightly exceed, the interest rates that banks pay to borrow overnight (Sterling Overnight Index Average, known as SONIA). This also means money market funds offer better payouts when interest rates are high, but you can't fix on a higher rate.
There have been rumours that cash or 'cash-like' investments such as money market funds held within stocks and shares Isas, will soon be subject to tax, although this remains unconfirmed.
Don't panic Taking your money out of your investments prematurely risks losing more than if you had stayed calm and focused on the long term. Think carefully about whether an investment's downturn is likely to be permanent or just a bump in the road.
Invest in different types of assets The more broadly you invest your money, the less susceptible you'll be to big losses in any one specific investment. You can invest in a mix of assets, such as shares, bonds and cash-like investments, to balance risk.
Invest in different sectors and countries By spreading your money across different countries and sectors, you might be able to pick some gains that help to balance out poor performance elsewhere. With this in mind, consider countries and sectors whose economies and pressures aren't too closely linked.
Don't forget about fees and taxes Ensure you're not paying more tax on your investments than you need to by using a stocks and shares Isa. Each provider charges different fees, the largest of which will consistently take a chunk of your returns – regardless of whether they're good or bad. We compared fees, customer service, ease of use and more when compiling our reviews of the best stocks and shares Isas.
