“This is what the LORD Almighty says: ‘In a little while I will once more shake the heavens and the earth, the sea and the dry land. 7 I will shake all nations, and the desired of all nations will come, and I will fill this house with glory,’ says the LORD Almighty. 8 ‘The silver is mine and the gold is mine,’ declares the LORD Almighty. 9 ‘The glory of this present house will be greater than the glory of the former house,’ says the LORD Almighty. ‘And in this place I will grant peace,’ declares the LORD Almighty.” (Haggai 2:6-9)
We’ve discussed here in the past the imagery of Your Fruitful Tree. After you’ve taken care of your Roots and Trunk, it’s time to focus on healthy Branches, Leaves, and Fruit which are the result of carefully constructed Roots and a solidly developed Trunk. As we’ve discussed, most people want to rush towards the “exciting” risky areas of growing fruit by focusing solely on fruit (stocks, bonds, real estate, etc). But the best way to grow that fruit is to build the right structure so that ripe fruit is a natural consequence of the tree that you’ve grown.
We discussed the different areas of risk present in the world and how to protect against them. One area of risk that we have been discussing a lot recently is that of inflation and Dollar devaluation. Although the dollar has been slowly devalued throughout your life (no matter how old you are), it has been a slow gradual destruction of your wealth which most of us never notice. Also, because we are in a Dollar denominated system, it is hard to see outside of this system. It has always served us reasonably well and it is all that we know. For this reason, we (along with most every other US advisor out there), have never spent much time discussing the risk associated with an allocation that is extremely Dollar-centric. And up until now, there hasn’t been too much reason to worry.
But now there are numerous reasons to be incredibly concerned about storing our monetary assets in only Dollars. One of the things that you will need to decide is to what degree do you want to allocate away from Dollars and in so doing, which additional risks are you willing to take on. Anywhere that you put money has risk associated with it. It’s a question of which risks are acceptable to you. Also, if you develop a comprehensive strategy that is layered with different products providing different benefit and risk characteristics, you can reduce the risk and increase the performance of your overall portfolio.
As we move into this discussion, we will look at hard assets such as gold and silver as well as foreign currencies. There are risks associated with each of these but when measured against the risk facing the US Dollar, you might come to decide that each faces less individual risk than the Dollar and that together in a comprehensive strategy, you can vastly reduce your risk.
This post is Part 1 in the series A Few Ways to Prepare. To continue with this series, click on Pt 2.
Photo credit: gizmocrazy