The Covid-19 pandemic has not stopped Indians from investing so far. Over recent months, millions of new Indian investors have entered the stock markets and demand for gold is off the roof in the country. Cryptocurrencies have also emerged as a lucrative option because they have outperformed all other asset classes.

But experts have a word of caution for the non-traditional investment avenue given its tendency for sharp volatility.

“Bitcoin’s daily returns fluctuate significantly more than most commodities, equity portfolios, and government-issued currencies around the world,” said Ariel Zetlin-Jones, associate professor of economics at Carnegie Mellon University’s Tepper School of Business.

Somnath Mukherjee, managing partner and CIO at Mumbai-based ASK Wealth Advisors questioned, “How can anything which goes up and down by 60% in a year be a part of an investment portfolio?”

Bitcoin, the biggest cryptocurrency, delivered a whopping 101% return on investment between March and August. This high-return trend coincided with the Indian apex court’s March 5 order, which quashed the Reserve Bank of India’s circular barring financial entities from providing services to virtual currency dealings.

Subsequently, Indians, who had held back their investments due to the RBI rule, flocked back to crypto exchanges.

The sharp traction for bitcoin during an economic downturn isn’t surprising. After all, the idea behind its creation was to delink the virtual currency from what’s happening in the world.

But besides volatility, there are other reasons why bitcoin is far from being a safe haven for an average Indian saver.

For starters, India still does not have very clear regulations for cryptocurrencies, and there’s a looming risk of regulatory challenges, including a blanket ban, which was imposed previously, warned Mukherjee of ASK Wealth Advisors.

So, bitcoin is only suited for a risk-tolerant investor who has the capacity to absorb losses and book profits at the right time, said experts. Average Indian savers have other options that are not directly linked to an economy’s performance.

Gold glitters in dark times

Traditionally, gold has been a safe haven to park money during an economic decline. This time is no different. The price of the yellow metal has gone up sharply since March and it is better placed in terms of risk-to-reward ratio.

“It has proved its mettle as a safe haven. The combination of high liquidity in the system due to record low-interest rates across the world and economic uncertainty has fuelled gold prices. We are advising our clients to have a higher allocation to gold in their portfolio,” said Mukherjee of ASK Wealth Advisors.

Gold has been gaining so much popularity that even the well-known investor Warren Buffet has shunted his tried-and-tested investment strategy of staying away from the yellow metal. He recently invested in the world’s largest gold mining firm, Barrick Gold Corp.

Indians – who have always been gold crazy – are piling up on yellow metal. The import of gold and silver has gone up since the country went into lockdown. In fact, gold imports were on an upward trend even before the spread of Covid-19 despite the fact that India’s economy was in a slow lane.

But gold prices started correcting themselves this month following the news of Russia developing a Covid-19 vaccine. There are hopes that a vaccine would eventually lead to a boost in economic activity as it would allow lockdowns to end.

But Mukherjee asserts that a vaccine won’t straight away bring structural change in gold prices.

“It will take a year or two for the vaccines to be administered to a large share of the population,” he said. “Also, there is a risk that a new strand of the virus could emerge and forestall the attempts to disburse the vaccine.”

Lack of other options could also be driving investors toward gold.

Low deposit rates a concern

The money deposited with banks is considered safe as it gives fixed returns. But with India’s central bank cutting rates to revive the sluggish economy, interest paid on deposits is declining.

With the retail inflation in India at 6.93% in July and interest paid on deposits at 6% currently, Indian households are losing money.

It leaves Indians with the only inflation-beating asset class – equities. But here they face a different set of problems.

Stock markets high on valuations

After witnessing an unprecedented fall in March, India’s benchmark indices have been out of sync with the economic reality. The valuations have surged and are a far cry from the first-quarter earnings, which have been disastrous.

The stock markets have soared on the hope of an economic revival and halt in the spread of Covid-19. But both these hopes are fast fading. After the initial green shoots, the Indian economy is stagnating and at the same time, the number of Covid-19 cases is rising by the day.

Another factor that is pushing the stock markets is the legion of new retail investors. Around 2.5 million new investors reportedly entered the market between April and June – when the country was under a stringent lockdown and markets were volatile.

Experts believe this rally led by newbies is fraught with risk and one needs to be cautious. “First-time investors…shouldn’t get influenced by friends and family members who provide what is called in India is popularly known as ‘tips’,” warned Ankur Maheshwari, CEO of Equirus Wealth.

Also, mutual fund houses haven’t been able to beat market returns despite charging a hefty amount to manage funds. “Over the last two years, only a select few stocks have given good returns. This narrow rally hasn’t helped fund houses,” said Maheshwari. “But there is still a lot of opportunity in small and mid-cap space, which can drive market-beating returns in the long-run.”

Perhaps it’s best for an average Indian saver to stick to the first rule of investment – diversification.

This article first appeared on Quartz.