Market Volatility: 2 Cash Alternatives for Uncertain Markets

There are risks with all assets, even including cash. It can be a wise idea to invest in cash alternatives such as gold or cryptocurrencies or in companies that operate in those sectors like Agnico Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM).

| More on:

With everything going on in the market, it certainly makes sense to include gold and cryptocurrencies in your investing portfolio. These asset classes give you a cash alternative you can draw upon if traditional fiat currencies lose value through inflation. They may even increase in value, giving you more buying power to take advantage of opportunities.

Think of physical gold and cryptocurrencies as a cash asset

Stop thinking of the two as speculative investments. Consider these as alternative cash assets that may come in handy if things start to fall apart. If the U.S. dollar, for example, starts to head lower, gold has traditionally moved higher. It is also not controlled by any individual government — which is appealing to those who have lost faith in monetary policy.

Cryptocurrencies don’t have as long a history as precious metals, obviously, but they too have their benefits. For one thing, they are not controlled by any government. If the monetary system has troubles, or if runaway inflation were to rear its ugly head, cryptocurrencies might provide a valuable medium of exchange.

Buy companies that operate in the sector

Companies that make money off precious metals or cryptocurrencies should not be considered cash, though, in much the same way that a bank is not a substitute for holding dollars. Rather, these companies will provide a leveraged opportunity to make explosive returns if the underlying commodity or currency increases in value.

In the gold sector, a number of stocks could be good bets. One of the best at the moment is Agnico Eagle Mines Ltd. (TSX:AEM)(NYSE:AEM). This company’s assets are in North America which, given the global climate, provides a good degree of safety.

Apart from its strategic positioning in North America, this company maintains a low cost of production. It also has a small dividend yield of about 1.4% that’s comforting comforting while you hold the stock. 

Crypto stocks are few and far between, unfortunately. One company you could look at is HIVE Blockchain Technologies Ltd. (TSX:HIVE). This company has significantly more cash than debt, which should help it to ride out a difficult economic situation. 

Unfortunately, the company doesn’t make any money as yet. The real bet with this company is that cryptocurrencies will be increasingly adopted as an alternative to government-issued currencies. This stock is risky, which is why you should only buy a small amount. 

The bottom line

If you are going to buy gold or cryptocurrencies as cash alternatives, you should not invest your entire portfolio into them. Rather, buy a small amount, perhaps 5% of your total invested capital at a maximum. Cryptocurrencies are especially volatile and risky. You need to be careful about your investment. 

Gold is less of a risk, given its long history as money, but it also is quite volatile. Think of these assets as a form of insured cash that you can put to use in a crisis.  The stocks could potentially pay off enormously should the underlying assets increase in value.

Using both the physical gold and crypto as well as the stocks could give you cash to spend in the event of a prolonged market downturn.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Kris Knutson has no position in any of the stocks mentioned.

More on Stocks for Beginners

Female raising hands enjoying vacation, standing on background of blue cloudless sky.
Stocks for Beginners

How to Allocate $40,000 Across Different Stock Investment Opportunities

Are you wondering how you could turn $40,000 into a steady stream of income and gains? Here's a diverse four-stock…

Read more »

Asset Management
Dividend Stocks

TFSA: 3 Canadian Stocks to Buy and Hold for a Lifetime

Want to build wealth in your TFSA? Then these three Canadian stocks are some of the best options out there.

Read more »

ways to boost income
Stocks for Beginners

5 Ways to Invest $5,000 for Long-Term Financial Security

Find out how to invest smartly for financial stability. Learn about stocks and strategies that can safeguard your finances.

Read more »

3 colorful arrows racing straight up on a black background.
Stocks for Beginners

2 Rallying TSX Stocks You’ll Wish You Bought Sooner

Although they’ve rallied hard, the growth story for these two top Canadian stocks might just be getting started.

Read more »

The TFSA is a powerful savings vehicle for Canadians who are saving for retirement.
Stocks for Beginners

How to Build a $7,000 TFSA Position That Grows Year After Year

TFSA tax-free withdrawals make it an attractive instrument for a growth portfolio that can make you wealthy in the long…

Read more »

Canadian energy stocks are rising with oil prices
Energy Stocks

I’d Put My Whole $7,000 TFSA Into This Single Dividend Stock

There are strong energy stocks, and then there's this dividend stock offering major growth and income.

Read more »

Skiier goes down the mountain on a sunny day
Stocks for Beginners

Meet the Magnificent TSX Stock That Continues to Crush the Market

This TSX stock is one of the best options out there, even while it continues to climb higher and higher.

Read more »

Make a choice, path to success, sign
Stocks for Beginners

The $35,000 Stock Investment Strategy That Balances Risk and Opportunity

Wondering how to build a portfolio of stock investments? Here's a five-stock diversified portfolio you can hold for years ahead.

Read more »