1. financial
2. physical
Financial
Remember FerFAL? Read his blog if you haven't
I, by no means, claim to be an expert or anything. I just put down my thoughts on how to secure my savings. I welcome all of the readers post comments.
As I said before, most people see economic downturn is something inevitable and they must ride it through while some others believe it's an opportunity that they have been waiting for and they can profit from. In reality, well managed wealthy people don't fear the downturn, they often come back even stronger.
Now let's look at the three key points I mentioned before:
1. Go international
2. Diversify
3. Educate yourself
4. Be prepared
Go International
The only economic downturn that can affect the whole world is the fall of USA, China or Japan. Even then there are parts of the world that would not be affected.
Wealthy people often have their asset spread around the world. Now I don't mean we must reach the level of Warren Buffet or Bill Gates to be called "wealthy." Wealth is a relative term. To many, actually probably 80% of the world, everyone of us who can read this post is fabulously wealthy!
More importantly, "go international" is NOT about money. It's about mentality!!! The mentality that you can work and live comfortably in more than one country. If you don't speak anything but American, hey, many countries speak English. In fact, once you step outside of the United States, you will definitely find a brave new world. Opportunities, people, money, culture, and food. There are more than just football, fried chicken, freedom fries, and steak hamburgers.
In my culture, we have a saying: a shrewd rabbit has three rabbit holes. You don't necessarily need three, two would do just fine.
In fact, more and more American go to South America and buy properties there (do it while you still can - before the $ falls), they rent them out to collect monthly income. Should anything go south, they go south too, but for vacation :-) Again, those are not Bill Gates, they are regular American just like you and me.
Now, some may ask, where does the money come from? I'll answer it in another post.
Diversify
Here's something I cannot really find in any general "investment" book unless it's specific about this topic.
When talking about "diversify," most often talk about the classic allocating money in between bond, security, stock, mutual fund, CD, cash and properties. There's one problem, all of them are in one "currency".
Note the word "currency." Currency is not money; money has real value while currency is what people call "fiat money", meaning the government says it's "money" and we trust our government. They say $1 can buy one loaf of bread, then that's how the life is.
What happens when the government betrays our trust? (note I used the word "when," not "if") Never happened? Every government in the world history betrays its people's trust. Would never happen in America? Google "gold confiscation" by the beloved FDR or here
When the government prints too much money to support its deficit and debt, now you need $3 to buy 1 loaf of bread even though the government still says it must be $1. Your "diversified" net worth just takes a hit of 66% depreciation.
I don't think anybody would appreciate this very well.
Look at what happened in Argentina, all the sudden, their peso:dollar dropped from 1:1 to 1:3. No credit card was accepted anywhere. Period! Banks closed their doors and set a limit of daily withdrawal of 10 pesos, with which you must pay for bread, bills, and transportation. Unemployment rate skyrocketed.
Yeah, you, like me, may be sitting on a pile of cash, stock, house, etc, but none of them can be converted to money to pay for stuff, not even the basic food.
Now this was my mistake, relying on one single currency while holding no tangible asset - all my savings were in cash/cash equivalent, stock, bond and mutual funds since I don't own any properties.
To avoid this, and in a long term to make a profit (5-10-20 years), it is my stupid opinion that all of us must invest a significant portion of our savings (1/4-1/2) in:
a. precious metals - gold, silver, platinum, palladium
b. properties - buy them at housing market bottom (however, when every Joe Blow talks about investing in real estate is a great idea, it's about the time to sell)
Go international!!! Buy them and store them in another country!!! I cannot stress this point more!!!
Why gold?
Gold is and has been the only REAL MONEY of the world since there's human. Actually, silver is, such as the Great China had been on silver standard for 5000 years and only broke off in 19xx, but that's another story.
Gold, the precious metal, cannot be mined as much as we want. Every year, whatever we do, we can only get 3-4% of increase of production. It's also very inert, meaning it does not decay or rust, and it is used a lot in industry and jewelry business.
Why is gold so important? Gold backed dollar was the real money. Since breaking off the link between the dollar and gold in 1971, special thanks to the great President Nixon, our beloved government can finally print as much paper currency as they want!!!
What a lovely world!!!
We, most of us, have forgot gold is the money.
No comments:
Post a Comment