Doomsday Investing

The world economy is far from the pink of health,but I don’t think that the end of the world ,as we know it, is upon us.However I do believe in having a wealth pyramid in place.If your are coming in late,you can read more about it in an older post here: https://wealthymatters.com/2011/09/30/wealth-pyramid/#more-1948.And the time for building an ark is long before the deluge…..

The wealthiest in the world have the most to lose in a crisis.They also often care the most about not losing it all.Moreover they have the money and the contacts to put in place the most elaborate fall back plans.The following are some actions that wealthy people in different parts of the world seem to be taking to limit the damage to their fortunes.( http://www.reuters.com/article/2011/10/04/us-wealth-summit-investment-idUSTRE7933LS20111004) Why not be influenced a little bit by them?Especially with a little part of the funds lying at the bottom of the pyramid?The worst that could happen is that nothing happens and we feel foolish.On the other hand if we wait till there is blood on the streets,it might be too late to do anything much.

1.Consider having a “catastrophe portfolio” which allocates one third of the money to gold, another third to defensive and internationally diversified blue chip company shares and the final third to the debt of ultra safe developed countries.The Swiss Banks like Wegelin are selling such portfolios as protection against episodes of societal breakdown and financial collapse.

2. A less  drastic step would be to go underweight in stocks and overweight in cash, in one’s portfolio,though instability of the banking system raises challenges in terms of where to keep that cash.Swiss Bankers are suggesting that their clients keep 25 to 30 percent of their portfolio in stocks compared to 40 percent or more prior to the financial crisis of 2008.

3.In southern Europe, where the financial crisis is at its most fierce, and the Middle East where the Arab Spring has heightened the sense of political risk, rich people are now sending more money abroad.The trend marks the end of an era in which tycoons in both regions kept much of their wealth at home, attracted by high rates of return from frothy property and stock markets before the turmoil set in.The Chinese are increasingly moving part of their wealth to the US and Canada.The relatively strong Dollar is an added bonus.

4.Among the assets most favored, particularly by Middle Eastern investors, is top-end residential and commercial property in London.They have also started moving investments to other European capitals such as Paris.Basically,why not acquire a hidey-hole?

5. Look abroad for new opportunities.This is something that is not restricted to people from the Southern European states.Indian money too is moving abroad in search of opportunity and to avoid the depreciation of the Rupee.

Can you think of other ways to prepare financially for Armageddon?Please list them out using the comment feature.