As Greece's financial crisis intensifies, it reminds investors about the importance of knowing the best investments to keep assets safe.
The Greek debt crisis is a prime example - but far from the only one - of the type of threats ordinary citizens face when a country gets into deep financial trouble.
You see, the government's debt woes have made holding money in a Greek bank increasingly risky. That's why Greek citizens pulled 3 billion euros ($3.41 billion) out of their bank accounts between Monday and Thursday last week - more than 2% of all household and corporate deposits held in Greek banks.
The Greeks fear that their desperate government will initiate capital controls, which would restrict the amount of money account holders can withdraw and prevent them from transferring money out of the country.
It's something we've seen done before...
Why People Need Safe-Haven Investments
That's what happened in nearby Cyprus in 2013. Account holders were limited to withdrawals of $336 a day and could not transfer any money out of the country. The limits lasted for two years.
Iceland, the first European nation to experience a debt crisis in 2008, imposed capital controls in response. Those restrictions weren't lifted until earlier this month.
And it can get worse. In Cyprus in 2013, anyone who held more than 100,000 euros ($113,550) in their account had 40% of their balance seized to bail out the failing banks.
But a debt crisis is just one threat to your money.
There's also the devastating hyperinflation, the result of a nation's runaway spending and debt. The most famous example of this is Weimar Germany in 1923, but we've seen many episodes of hyperinflation since, including Argentina in 1989-1990 and Zimbabwe in 2007-2008.
It's even happening today. The current rate of inflation in Venezuela is 68.5%.
You never know when some sort of financial tragedy will strike. Remember, the U.S. stock market crashed twice in less than a decade (2000 and 2008).
Here are the best investments to protect yourself from any financial implosion...
The Best Investments for When Your Money Is Under Threat
Investors need to find safe-haven investments before a crisis strikes. As we've seen, once a crisis erupts it's often too late to act.
The best investments to hold during a crisis are those that appreciate in troubled times and that are beyond the reach of banks and the government.
Some safe-haven investments are better suited for dealing with one type of crisis than another.
Let's take a look at several of the best investments for a crisis and the strengths of each.
Best Investments for a Crisis No. 1: Gold and Silver
Any review of safe-haven investments has to start with the precious metals, especially gold. The yellow metal has served as a store of value for thousands of years. And the gold price nearly always rises when there's turmoil in the world. Gold is also relatively easy to buy and sell. Although not as highly valued as gold, silver shares all of these attributes and is also a good safe-haven investment. Just about the only drawback to gold and silver is that they are not easily spendable.
Best Investments for a Crisis No. 2: Commodities
Commodities cover a broad range, from food (corn, wheat, and sugar) to energy (oil and natural gas) to industrial metals (copper and aluminum). Commodities are a good hedge against an inflationary crisis, as their price rises against a devaluing currency. But commodity prices could fall in a different type of crisis, particularly if national economies lock up and global commerce drops off.
Best Investments for a Crisis No. 3: Bonds
Like gold, bonds have become a traditional safe-haven investment. U.S. Treasury bonds in particular are popular because they're backed by the U.S. government. Bonds are good to own when other markets are plunging. But inflation is bad for bonds. Inflation usually brings higher interest rates that cause bond prices to fall.
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Best Investments for a Crisis No. 4: Real Estate
Real estate has long served as a hedge against inflation. And because real estate is a tangible asset, investors have a greater degree of control over its performance (renovation, improvements, choice of tenant, etc.). It also remains steady through stock market downturns. (The 2008 crisis was a notable exception, as it was triggered by the subprime mortgage crisis.) The main drawback to real estate is the large initial investment required.
Best Investments for a Crisis No. 5: Bitcoin
In the world of safe-haven investments, Bitcoin is the new kid on the block. Some even consider the digital currency "Gold 2.0." The Bitcoin price would soar in an inflationary environment, making it a great hedge. Bitcoin is also disconnected from stocks, so it would not drop during a market crash. But Bitcoin can also function as a currency. And it can be sent in an instant over the Internet anywhere in the world. Bitcoin's main drawback is that it is just six years old and so has not earned the kind of trust investors have in safe-haven investments like gold and silver.
Follow me on Twitter @DavidGZeiler.
When Gold Meets Bitcoin: Both gold and Bitcoin are good safe-haven investments, but what if you could combine the best features of both? That's what AnthemVault has done with HayekGold. In an exclusive Money Morning interview, AnthemVault CEO Anthem Blanchard talks about how this system works...
About the Author
David Zeiler, Associate Editor for Money Morning at Money Map Press, has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.