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Many who stayed in ‘safe’ havens suffered the most

Gold had its worst slump since 1981, falling 28 percent in value.

Associated Press/File 2012

Gold had its worst slump since 1981, falling 28 percent in value.

Being safe left some investors sorry in 2013. That’s because some financial assets that are usually considered safe and steady lost money.

After three decades of steady gains, bonds had a bad year. Prices for Treasurys and other kinds of bonds slumped as the US economy improved, investors’ nerves steadied, and the Federal Reserve prepared to pull back on its huge bond-buying stimulus program.

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Gold went from haven to headache. The metal plunged in 2013 as the United States maintained its recovery and inflation was absent.

Keeping money in a bank account worked when the stock market was plunging in 2008, but not since then. With the Standard and Poor’s 500 index soaring 30 percent in 2013 — 32 percent including dividends — returns from a savings account looked meager.

Here’s a look at how supposedly safe assets performed:

Treasurys and other bonds

From 1981 through 2012, demand for Treasurys rose and their yields, which move in the opposite direction, fell. The yield on the 10-year Treasury note bottomed at a record low of 1.39 percent in July 2012, when the European debt crisis intensified and people rushed to buy US government debt securities.

In the 1980s, investors bought Treasurys as inflation eased and interest rates fell. That made higher-yielding Treasurys already in the market more attractive. Investors also bought Treasurys during the financial crisis in 2007. Treasurys are considered among the safest financial assets because they are backed by the US government.

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Bonds also rose as the Fed began purchasing Treasurys in response to the financial crisis and the recession to keep interest rates low to boost the economy. The US economy now appears to be gaining steam and the Fed, the biggest buyer of Treasurys, will start reducing its purchases in January. The yield on the 10-year Treasury note climbed from 1.76 percent to as high as 3.04 percent in 2013 as investors sold bonds in anticipation of the Fed’s pullback.

The rise in yields and the corresponding decline in prices has meant losses for bond investors.

The Lipper US index for Treasurys, which measures the performance of government debt, has lost 9.1 percent since the start of 2013.

Other bonds, which are priced in relation to Treasury debt, also had a bad year. Municipal bonds fell 2.6 percent, according to Barclays. High-quality company bonds also edged lower.

‘‘At some point, interest rates are going to have to go up,’’ says Bob Gavlak, at Strategic Wealth Partners. ‘‘You need to understand that bonds aren’t necessarily a safe haven, as everybody has viewed them over the last 30 years.’’

GoldGold had its worst slump in more than 30 years. The price rose every year from 2001 to 2012 as investors looked for an alternative to the US dollar and protection against inflation. Gold went as high as $1,900 an ounce in September 2011 as Congress fought over raising the debt ceiling, threatening to push the nation into default.

In 2013, gold started to slump as things improved. In April, it plunged 9 percent in one day. At its current price of $1,202, gold has lost 28 percent of its value this year, the worst drop since 1981.

Yet rising tensions between China and Japan or conflicts in the Middle East could unsettle financial markets 2014 and ensure that gold stays in investment portfolios.


Investors moved into cash as the stock market collapsed in 2008. Unfortunately, many stayed there, even as savings rates stagnate while the Fed keeps its benchmark short-term borrowing rate close to zero.

That means that inflation is eroding the value of the money.

In the 12 months through November, consumer prices have risen 1.2 percent, more than the best rates currently offered on savings and money market accounts or CDs.

Investors who stayed with stocks from October 2007, before the market crash, to September 2013 would have had a cumulative return, including dividends, of 21 percent.

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