Gold is the classic go-to option for risk-averse investors

Although the S&P 500 has been doing well this year and is up around 9% thus far, tracking the index may not be the safest-looking option given its heavy exposure to top tech stocks, such as Nvidia and other tech giants. For risk-averse investors, the need may be to find something safer to invest in, especially if you’re worried about the direction of the economy and a tech bubble bursting in the near future.

Gold, silver, Bitcoin, and dividend stocks all offer intriguing options for diversification. And investors have at times turned to these investments in an effort to reduce risk. But which one of these options is the best one today, if your goal is to find a quality, safe-haven investment to put your money into right now? Let’s take a look.

Gold is the classic go-to option for risk-averse investors

When the economy is in a downturn or investors are worried about the future, gold is usually in high demand. In 2020, amid the early stages of the pandemic, the price of gold rose by 25%. However, in 2022, when interest rates were rising, its performance was flat. That’s because when rates are high, it’s easier for investors to get a good return from other investments, and gold becomes less attractive.

Gold is largely a speculative investment as its value isn’t tied to earnings or revenue the way a typical stock is. It can be a good store of value, but not much else. This year, with interest rates potentially rising higher, gold may be destined to rise even lower. It can still be a good option for long-term diversification, but I don’t think it’s the best safe-haven asset given the current economic conditions.

Silver is another precious metal that’s been popular with retail investors of late

Silver is not unlike gold in that it can be an effective way to diversify. Demand for silver may also rise higher due to the ongoing build-out of data centers for artificial intelligence (AI). It’s more of an industrial metal than gold, and thus, has more of a compelling investment case than gold in that sense.

The iShares Silver Trust, which tracks silver prices, has risen by 80% in the past year due to the sharp increase in silver. While the price has been falling recently, retail investor interest over the past year suggests it could spike again if there are renewed concerns about the economy.

However, with too much dependent on retail investors and AI also playing a role in silver demand, this may also not be the ideal type of investment for risk-averse investors.

Bitcoin has promise, but it’s failed to prove to be the “digital gold” it was advertised to be

Diversifying outside of stocks and going into crypto might seem like a good way to reduce risk. But the bad news is that Bitcoin and other cryptocurrencies may simply increase your overall risk rather than reduce it. They are highly speculative investments that depend not only on demand from retail investors but also on government reforms and policies.

When the current administration was seen as pro-crypto early on, Bitcoin was surging, and last year it hit record highs. But the progress may have been too minimal for investors. And with retail investors turning their attention to AI, Bitcoin and other digital currencies appear to have simply fallen out of favor. This year, Bitcoin has declined by close to 30%. It has often been called “digital gold,” but it’s been anything but, as its wild swings make it unsuitable for reducing risk.

Dividend stocks provide value, dividends, and can offer long-term stability

Dividend stocks can be highly valuable for the recurring income they generate. But investing in just a single dividend stock can be risky, because a company can undergo change, and what may seem like a safe investment today may not be so in five or 10 years. That’s why, with dividend stocks, the key is to go with an exchange-traded fund (ETF) that offers broad exposure.

This is where the Schwab U.S. Dividend Equity ETF (SCHD +0.36%) comes into play. It yields 3.3%, which is higher than the S&P 500 average of just 1.1%. Plus, with around 100 holdings in its portfolio, it gives you a good mix of dividend stocks that ensures you aren’t putting all your money into just one or even a handful of stocks.

Not a single stock in the ETF accounts for even 5% of the fund’s portfolio. And the portfolio is filled with blue chip stocks such as UnitedHealth Group, Procter & Gamble, Home Depot, and many others. This diversification is crucial when it comes to minimizing risk, and that’s why, for risk-averse investors, the Schwab ETF and funds similar to it could make for the best safe-haven investments these days. The fund averages a modest price-to-earnings multiple of 19, making it a good option when you consider value, long-term safety, and recurring cash flow.