NEW YORK–Be­ing safe left some in­vestors sor­ry in 2013.That's be­cause some fi­nan­cial as­sets that are con­sid­ered safe lost mon­ey. Here's a look at how some of the sup­pos­ed­ly safe as­sets have 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 ten-year Trea­sury note bot­tomed at a record low of 1.39 per cent in Ju­ly of 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, which, at least in the­o­ry, should al­ways be able to re­pay its debts.

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 cen­tral bank has been pur­chas­ing US$85 bil­lion worth of Trea­surys and mort­gage-backed se­cu­ri­ties each month.

The US econ­o­my now ap­pears to be gain­ing steam and the Fed, the biggest buy­er of Trea­surys, plans to start re­duc­ing its pur­chas­es in Jan­u­ary. The yield on the ten-year Trea­sury note climbed from 1.76 per cent to as high as 3.04 per cent in 2013 as in­vestors sold bonds in an­tic­i­pa­tion of the Fed's pull­back.

The rise in yields and the cor­re­spond­ing de­cline in bond prices has meant loss­es for bond in­vestors, prompt­ing them to cut their hold­ings.In­vestors pulled an es­ti­mat­ed US$32 bil­lion out of Trea­sury se­cu­ri­ties in the first three quar­ters of 2013, putting Trea­sury funds on track for the first year of net out­flows since 2003, ac­cord­ing to Lip­per fund flow da­ta. The Lip­per US in­dex for Trea­surys, which mea­sures the per­for­mance of gov­ern­ment debt, has lost 9.1 per cent since the start of 2013.

Oth­er bonds, which are priced in re­la­tion to Trea­sury debt, al­so had a bad year. Mu­nic­i­pal bonds, is­sued by states and cities, fell 2.6 per cent, ac­cord­ing to Bar­clays in­dex­es. High-qual­i­ty com­pa­ny bonds al­so edged low­er.

Gold

Gold had its worst slump in more than 30 years.The price of gold 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 US$1,900 an ounce in Au­gust 2011 as law­mak­ers ar­gued over rais­ing the US debt ceil­ing and threat­ened to push the na­tion in­to de­fault.

In 2013, gold start­ed to slump as in­fla­tion didn't ma­te­ri­alise, in­vestors shrugged off the grid­lock in Wash­ing­ton and the US econ­o­my re­cov­ered. In April, it plunged nine per cent in one day. Re­ports that the Mediter­ranean is­land na­tion of Cyprus could sell some of its gold re­serves to pay off its debts af­ter a bailout by the Eu­ro­pean Union al­so rat­tled the mar­ket.At its cur­rent price of US$1,202 an ounce, gold has lost 28 per cent of its val­ue this year, the worst drop since 1981, when it slumped 33 per cent.

Cash

In­vestors moved in­to cash as the stock mar­ket col­lapsed in 2008. Un­for­tu­nate­ly, many have 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."That's ob­vi­ous­ly a big prob­lem," says Chris Haver­land, an as­set al­lo­ca­tion strate­gist for Wells Far­go Pri­vate Bank.

In the 12 months through No­vem­ber, con­sumer prices have risen 1.2 per cent, more than the best rates cur­rent­ly of­fered on sav­ings and mon­ey mar­ket ac­counts or CDs. Even if long-term bond rates rise when the Fed starts eas­ing back on its stim­u­lus, the short-term rates off which most sav­ing ac­counts are based are go­ing to stay close to ze­ro for at least an­oth­er year, says Haver­land.Cash may still be the safest op­tion for in­vestors, but in­vestors may al­so be miss­ing out on bet­ter op­por­tu­ni­ties else­where.

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 per cent. Haver­land es­ti­mates that the re­turn on cash over the same pe­ri­od was 3.6 per cent.

AP