Safe haven

moving capital to the safest possible investment to protect oneself from loss during an unsettling period in the market. For example, when a major bank fails, cautious money market investors may buy only government-backed money market securities instead of those issued by major banks. A flight to quality can be measured by the differing yields resulting from such a movement of capital. In the example just given, the yields on bank-issued money market paper will rise since there will be less demand for it, and the rates on government securities will fall, because there will be more demand for them.

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The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This flight is usually caused by uncertainty in the financial or international markets. However, at other times, this move may be an instance of investors cutting back on the more volatile investments for the conservative ones (i.e. diversifying) without much consideration of the international markets.

Investopedia Says:
For example, during a bear market investors will often move their money out of equities and into government securities and money market funds. Another example is investors moving investments from high-risk countries with political unrest and volatile economic conditions to less risky markets of other countries. One indication of a flight to quality is a dramatic fall of the yield on government securities, which is a result of the increased demand for them.

Related Links:
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Even though crashes, corrections and capitulations are bad news for investors holding the stock, there are still ways to profit. Connecting Crashes, Corrections And Capitulation
How to find a portfolio that will survive when the bulls stop charging. Has Your Fund Manager Been Through A Bear Market?
If your investments in the stock market are keeping you from sleeping at night, it's time to learn about the safer alternatives in the money market. The Money Market

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