When it comes to safe-haven assets, investors often think of gold as king. But the yellow metal comes with an opportunity cost.
That’s why I think S&P/ASX 200 Index (ASX: XJO) blue-chip shares could be a better safety net. Let’s explore.
What is a safe-haven asset?
A safe-haven asset is typically an investment that offers respite from market volatility. No doubt, then, plenty of investors have considered snapping up one or two in recent times.
The ASX 200 had a rollercoaster ride in 2022, ultimately ending the year 5% lower than it started. Looking further back, the index crashed in 2020 before roaring to a new all-time record high in mid-2021. If your stomach had been lurching through that time, you’re not alone.
Indeed, investor moves to protect hard-earned cash may have helped drive the price of gold higher in recent months. The metal is trading at US$1,936.30 an ounce today, as per CNBC. That’s around its highest point since April 2022.
But, while investing in gold might bring fewer risks than buying some stocks, it generally doesn’t provide the growth ASX 200 shares can. Nor does it pay dividends.
Fortunately, there is a middle ground for risk-averse investors. And that is ASX 200 blue-chip shares.
Why are blue-chip shares a ‘safer’ buy?
Blue-chip shares tend to offer sturdy balance sheets, competitive advantages, and greater brand recognition than their peers. They are also often industry leaders with a long track record of strong performance.
Such characteristics generally mean they can push through hard times without as much damage as, say, growth shares might experience. They can also provide capital growth and dividends, both of which can act as an inflation hedge.
Thus, they can provide a safe haven from much of the market’s volatility. Though, no investment can be guaranteed to provide either growth or downside protection.
Market watchers will likely recognise such blue-chip shares as investment banking giant Macquarie Group Ltd (ASX: MQG), big four bank Westpac Banking Corp (ASX: WBC), and conglomerate behind such retailers as Bunnings and Kmart, Wesfarmers Ltd (ASX: WES).
They each demonstrate many of the qualities of blue-chips and boast valuations of between $56 billion and $83 billion.
Why not both?
But why can’t a risk-averse investor have both? Of course, one can always hold both ASX 200 blue chips and gold.
They can also invest in the gold mining giant Newcrest Mining Ltd (ASX: NCM). Newcrest boasts a $20.5 billion market capitalisation and tends to rise and fall alongside the price of the yellow metal since its earnings are tied to the commodity.
