The Asset Class With The Best (And Safest) Returns

by Frost on October 1, 2011

What’s a young investor in the 21st century to do?

Stocks are tanking, and will continue to do so as long as our governments believe that the combination of monetary dilution and confiscatory taxation will turn the tide. Property values are still artificially high, buoyed by easy credit and partial monetization. I still think precious metals are a good bet, but it’s been an unexpectedly rough week for goldbugs like myself. I could be wrong, you know. As for cash and bonds, holders of either will be the first to take a bath once the reality of the western world’s central banks irresponsibility sets in.

In short, it’s a dangerous world for anyone with wealth to their name. It’s an especially dangerous world for the young, unsophisticated investor, with only a handful of cash in his pocket. Tough times are coming, and your goal as an investor should not be to nudge your expected 20-year return from 7 to 8%, as earlier, more fortunate generations were concerned about. Your goal should be to survive. To hold onto 50-80% of your wealth, even in a worst-case scenario. No matter what you do, you might still get wiped out over night.

Hat tip: Mangan

So what constitutes a safe investment strategy, in an era of potential collapse?

Diversification is one obvious principle to follow. Put your money into property, equities from different regions and industries, precious metals, commodities. Odds are, something will survive the crash. Watch out for counterparty risk, though.

But at the end of the day, there are no guarantees. You might still be fucked. If there were a 100% safe strategy for the contemporary investor to hold onto his purchasing power over the next fifty years, I would sign up for it right now. There isn’t.

There is, however, one asset class that will provide you with guaranteed returns and that can never be taken away from you: Investing in yourself:

– Books and other forms of self-education (language and cooking classes, martial arts)

– Health (gym memberships, sports leagues, active hobbies)

– Quality food (organic, grass-fed, locally grown)

– Relationships (dinners, drinks, gifts, experiences with friends and family)

– Unique experiences and travel

– The free time to take advantage of all of the above (find a lower-paying job with fewer hours, take unpaid vacation, quit your job to live off savings for a while)

When you spend (or forgo) money in pursuit of each of these means of self-improvement, you are making a trade-off between the amount of money you will have at some point in the future, and the skills and abilities you will have acquired. Everyone has to make some sort of tradeoff between the amount of energy they spend accumulating wealth, and the energy they spend becoming a better version of themselves. Most people thoughtlessly agree with the vague and breezy assertion that you should invest in yourself as much as possible, but in practice, how many shell out the cash for the items on that list? Very few. The rest eat crap, don’t read, don’t learn new things, pass up on social engagements because they’re trying to save money, and work 60-80 hour weeks to pour money into shiny possessions.

Obviously I think this is a stupid way to live your life. But the hoarders don’t see it that way. They think they’re investing in their future. They think that I’m irresponsible, because I make financial decisions that chip away at my bank account in the short term.Personally, I think becoming a better person is a worthy investment regardless of the alternatives. In the world as it is today though, when all of your hard-earned saving may disappear overnight, investing in yourself isn’t just the most lucrative asset class available – it’s also the only one that guarantees you’ll still have anything to show for it in a decade or two.

{ 8 comments… read them below or add one }

Andrew October 3, 2011 at 2:02 am

That’s a great point. Nice post.

Laguna Beach Fogey October 2, 2011 at 6:51 pm

This is sound advice. I work in the markets and give my clients similar tips. Dividend-paying stocks, high quality corporates, precious metals, commodities, property, small business. My personal favourites are the last two.

In light of what I think will be signficant instability in this country, even civil war, I’ve been devoting much of my time to networking with like-minded Euro American men in the community. It’s a painstaking process, as you can imagine. But I think it’s a good investment for when the SHTF.

Nice website.

xsplat October 2, 2011 at 4:28 pm

I’ve become a goldbug myself. Not too worried about the recent downturn. I agree with your strategy of not seeking to maximize returns just now. It’s about security. But I’m not worried about the drop this last week. I’m still buying every week. I’d not be surprised to see gold climb to $3000 during some scare. The tulip bulbs haven’t begun to be invested in in full force. And if I miss selling it during the peak and trading for land, that’s fine. At least I’m not holding paper.

(r)Ev October 2, 2011 at 2:15 am

Great post, Frosty. You got it right: invest in the self. Fuckall else.

If you do have extra cheddar that needs to go somewhere besides booze, fast cars, and broads, (the rest you’d just squander).

Commodities: Gold, Silver, Copper & Lead. High-velocity delivery systems for the latter two.

Tangibles. Long-shelf-life food items. Medical supplys. Water filtration systems. Fertile land, seed, farming equipment.

I could invest in Wall-Street (yeah right) but hypothetically let’s say that I can find a stock that doesn’t reek of the asset-class and corporate usury. Let’s say I find some legitimately badass, groundbreaking solar company that’s run by a visionary like Yvon Chouinard. OK, so they’re selling stock, and I want to buy some. I buy some, and some asshat like the douche in the video gets a fat commission on the sale. So does the NASDAQ or wherever the stock is listed.

FUCK THAT. If that company is doing something worth doing, I’ll buy it directly. I’ll put their solar panels on my house, make my house run efficiently so I run my meter backward, and make the motherfucking utility pay ME.

That’s all I have to say to corporate America on any level: FUCK YOU, PAY ME, BITCH.

I do as much business as I can in barter. I buy local. I buy direct from farmers, cutting out corporate middlemen. I do go to McDonald’s, actually. To take a dump in their sparkling-clean restrooms. Without buying a thing. No one can say I don’t give a shit about McDonald’s.

As you said, I invest in ME. Barbells, bows, pistols. Man stuff. Experiences: hunting expeditions, licenses, road trips, ski passes. Books like Bang, Voltaire, books on evolution and anthropology. Am I spinning my wheels? Yeah, top fuel dragsters spin their wheels too: See that shorty over there? She’s my bitch. And the second girl with us-she’s our wife. Yup. On the regular. That’s my kind of ROI.

I might kick over dead in 2 days, 2 months, or 2 years. Dead men tell no tales, and dead men’s investments mean nothing in the afterlife. And in the cool moments of awareness that remains as our consciousness flits about its final moments in the flesh as we shuffle off that mortal coil, all you’ll remember about your life will be those moments you seized, the emotions you shared, the love you gave, the passion with which you lived. Your bank account will mean NOTHING>NADA.ZIP*ZILCH. Burn it all now, else you’ll give 50% of it to the gov’t, before any heirs see it when you croak. If you do have heirs, give them rich experiences, cool gifts while you’re alive, and not a penny when you kick the bucked, because, again, the fuggin’ gov’t then gets half in through the death tax. And we all know what the gov’t will do–turn & give it to the Corporations. FUCK that noise.

As Jim Morrison said, I don’t know what’s gonna happen, but I’mma get my kicks before the whole shithouse goes up in flames.

Give my money to Banksters. Haha, yeah right. I got nothin’ but lead for you, honey.

Rowan October 1, 2011 at 7:01 pm

Great post Frost.

I’ve been investing in myself for while now, paleo diet, fitness, Mandarin lessons and living an interesting non 9-5 life. I’ve also been investing my free time starting a software business. Owning a real income producing asset instead of speculating (precious metals, property, stocks) will be the key to surviving the next great depression.

However, I’m still saving half my income, at the moment it’s piling up in my Australian bank account. If anyone wants to stockpile cash, keeping it in AUD, a currency backed by a resource based economy isn’t such a bad idea. Of course there’s a massive real estate boom about to pop in Australia, it still beats the rest of the West hands down.

Z October 1, 2011 at 6:00 pm

+1 to what AC said.

Also, the current state of global affairs is starting to resemble Atlas Shrugged, have you chewed through it yet?

AC October 1, 2011 at 4:50 pm

The risk with investing in “self-improvement” is that you’d better actually be improving, not just spinning your wheels in a way that feels productive. I’d bet a ton of people got master’s degrees in social work thinking that it was investing in themselves. (And I’m not exempting the type of activities engaged in by people in the reactionary/game/paleo sphere either.)

NomadicNeill October 1, 2011 at 1:09 pm

Agree. You can never lose the skills and knowledge that you accumulate over the years.

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