If you were interested in the history of financial markets, then you know that sometimes surprises occur here that can lead to the most tragic consequences.
Be it the collapse of Lehman Brothers or the bursting “bubble,” the consequences of these events can be felt for several days, or even several years.
No one better than the richest investors knows how serious the consequences of these events can be, because billionaires such as Warren Buffett, Ray Dalio or Jeff Bezos can lose billions of dollars in just a few hours, when unexpected fluctuations occur in the market.
That is why they strive to protect themselves as much as possible from a wide variety of risks. In the world there are global risks in the financial markets, from which the largest investors seek to insure themselves.
Return of inflation
Investor Karl Haykan is preoccupied with recent signs of inflation: "I think the main thing to worry about is the return of inflation."
How are investors insured against this risk? They invest in gold, raw materials, stocks, indexable bonds, real estate.
Record high debt
The level of world debt continues to grow. As of March 2017, it reaches $ 233 trillion.
At the same time, the world population is 7.6 billion people. Thus, the level of debt per capita in the world is $ 30,600.
However, several countries have reached historically record levels of private debt in the non-financial sector. These are Canada, France, Hong Kong, South Korea, Switzerland, Turkey.
At the same time, the US public debt already exceeds $ 20 trillion.
It is estimated that servicing this debt will cost the economy $ 6.5 trillion over the next 10 years.
Investors fear that if interest rates rise faster than expected, this will lead to disastrous consequences.
How do they try to insure themselves against this? They invest in gold and real estate.
The bond market is connected with the previous paragraph – the level of debt. Now for 30 years a bullish trend has been observed in the market. Many investors get rid of bonds.
If we talk about corporate bonds, then 84% of investors believe that the corporate bond market is greatly overvalued.
As for government bonds, 82% of investors believe that the government bond market is overvalued.
That is why billionaire investors are trying to stay away from bonds. As Warren Buffett said: "If I had to choose between long-term bonds or ordinary shares, I would choose stocks without hesitation."
How investors insure themselves: they limit the number of bonds in their portfolio, especially junk bonds.
Unexpected geopolitical events in the world can also cause large losses in the market.
In the event of war or armed conflict, investors also insure their assets.
They invest in cash, gold, in addition, they limit investments in certain industries, and also prefer to diversify their portfolios as much as possible.
Overly diligent central banks
Many world-class investors are also concerned about the unintended consequences that programs have had by central banks in different countries in recent years.
Investors always closely monitor the markets and try to ensure maximum security of their assets.
In the case of central bank programs, they try to protect themselves by investing in gold and real estate.
In addition, they try to keep assets outside the central bank system. It is noted that cryptocurrencies can become one of the possible options for storing income outside the central bank system.