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.