Most of us go through many fortunes while we search for a way to make our fortune.
We invest too much money in a rumor here, the deal of the century there, buying last years best performing mutual fund, and end by getting excited about the latest investing fad after the book comes out. We drop dribbles and drabs of money into dozens of hopeful projects, and then move on. We come to every party late, take obsolete advice from people that made money early, and then abandon our positions once reality strikes. I’m not picking on you, I’ve done it too.
There is a point in the Lord Of The Rings where the hobbits meet Strider and decide he must be true because he seems dangerous yet direct. They reason an evil person would seem more fair and safe. Good reasoning that. Reality is dangerous, crooks seem helpful, con-men wear ties and have great endorsements. One note Johnnies are eager for you to learn their note: even after everyone is tired of hearing it and it’s time is past.
No investment is forever. Most great investments have a short life span before new investors and financial product suppliers dilute any efficacious effects.
Depending on how you choose to cut the pie, there are only a few asset classes or a thousand. Let’s deal with just two asset classes — financial instruments and tangibles. You can have stocks, bonds, derivatives and such or you can have physical products. Most times they are a mish mash of conflicting trends and artificial relationships. Occasionally one becomes so dominate everyone knows that it will rule forever. At other times one slips so far that it is abandoned and those accounted as wise state it will never recover. This offers one route from poverty. This is money sitting on a sidewalk waiting to be picked up –you’ve heard it “Sell when everyone is buying, buy when everyone is selling.” Doing that is really tough, and until your insight yields profits you must do it without leverage while watching your holding’s value diminish.
Then comes the hardest part. As generals know, It’s easier to win a victory than to sustain or use the victory. Now the bad news. No asset in the world is at such a hated extreme that it should be accumulated and held without caution. Nothing is so admired it can be sold recklessly. We are in a turbulent time where force majeure or black swans are breeding at an awesome rate. Looking a decade or two down the road we can guess the dollar will have collapsed, the EU will have shed it’s United States Of Europe dreams, and a new world wide monetary system will be in place. What we can’t see is what will survive, if anything available to us today will thrive.
If you have more than enough wealth to sustain your future the answer is likely diversification. Find countries and economies that are stable and unlikely to fall far because they are already relatively poor. Spread some of your risks among them.
If you are in danger of submerging when inflation doubles or taxes and regulations go parabolic, it’s probably time to leave over-developed countries. Countries regress to and through the mean before they die. This can take decades or even centuries; but if you look around you’ll see many countries faltering after half a century or more of growth. Their rapid suicide may surprise the unwary. It’s better to be where growth is just starting. It’s probably time to move. I’ll leave you with just one thought:
Wealth is made through concentration, preserved through diversification.
Josh Morph