Remove the weeds

Just as weeds reduce the harvest, investment myths can mislead investors from achieving desired investment outcomes. We bust these myths and uncover the facts on some common misconceptions.

Investors tend to run to safe havens during periods of market volatility and downturns to limit their losses. Cash, gold and US Treasuries are typically considered safe haven assets. Safe haven assets supposedly retain their value over time. But it isn’t always so.

Myth 1

Cash is king


Holding cash has its downside

The value of a dollar is worth more today than tomorrow - thanks to inflation. Even the most conservative investors need to invest their cash to make sure their savings grow faster than inflation. Particularly when interest rates are low.

Idle cash not invested is lost potential returns. Idle cash in the bank should not exceed 6 months of living expenses.

Myth 2

Gold never loses its shine


Gold has its share of risks

Gold may be a hedge against inflation, but it is an unproductive investment in that you don’t earn income from holding gold. While gold adds diversity to a portfolio, its price is affected by market sentiment, the economy and the US dollar.

Other than gold coins or bars, you can consider buying the shares of gold mining companies but look out for their profitability.

Myth 3

US Treasuries are the safest assets


Nothing is completely risk-free

US Treasuries are government bonds, highly liquid, enjoy a high sovereign rating and have never defaulted. But as with all bonds, rising interest rates can erode the value of your investment.

Central banks tend to raise interest rates to counter inflation. Investing in Treasury Inflation Protected Securities (TIPs) is one way to protect your portfolio against this risk.

The general concepts shared are for educational purposes only and not for the use in the marketing or sale of any Eastspring investment products.

Viewers are advised to be cautious if they intend to invest in any products that are used in the illustrations as the illustrations do not cover the full spectrum of considerations required in making an investment decision.

This information is not an offer or solicitation by anyone in any jurisdiction in which such offer or solicitation is not lawful or in which the person making such an offer or solicitation is not qualified to do so or to anyone to whom it is unlawful to make such an offer or solicitation. It should not be construed as an offer, solicitation of an offer, or a recommendation to transact in any investments if mentioned herein.

The information contained herein does not have any regard to the specific investment objectives, financial situation or particular needs of any person. Investors may wish to seek advice from a financial adviser before any making investment decision. In the event that an investor chooses not to seek advice from a financial adviser, he should consider carefully whether the investment in question is suitable for him.

Eastspring Investments (excluding JV companies) companies are ultimately wholly-owned/indirect subsidiaries/associate of Prudential plc of the United Kingdom. Eastspring Investments companies (including JV’s) and Prudential plc are not affiliated in any manner with Prudential Financial, Inc., a company whose principal place of business is in the United States of America or with the Prudential Assurance Company, a subsidiary of M&G plc (a company incorporated in the United Kingdom).