Stop Waiting For The End Of The World…

In my quest to become financially independent, I try to prepare myself for all scenarios. I’ve certainly discussedmy concerns about the economy, government deficits and the fact that depending on the government or any other type of pension is foolish. I do my best to prepare myself for such scenarios but there is a big difference between having a portfolio that can sustain or do well in difficult times and trying to “predict the end of the world”.

Yesterday, I was discussing with a friend of mine who is shopping for real estate. He is very concerned about real estate prices in Canada and who would blame him?



He’s thinking about waiting a few years for some kind of decline. It’s not a terrible idea and in fact I remember thinking about doing the same thing before buying my house 3 years ago. I ended up deciding not to because it’s so difficult to type the market (no matter what market you’re investing in). Looking back, it’s a good thing that I did not wait. My family and I would still be on the sidelines. That crash has yet to come. It could take a few months, a few years or maybe a while longer. It’s almost impossible to bet or invest based on such scenarios.

Enter Gold Bugs

I’m not a huge fan of gold. I’ve written about it a few times but don’t currently own any. At some point, I will probably buy some but I don’t expect it to be a significant part of my holdings at any point. Others have gone all-in on gold as they prepared for massive inflation and a stock market collapse. It’s not impossible that we will witness such an event. And for a while that trade was profitable… But lately? They say a picture is worth a thousand words, so take a look at this chart from the Reformed Broker:



Ouch! Needless to say that it has not worked out very well. My main takeaway would be that it’s never a good idea to invest a big portion of your assets in an unlikely scenario. I can’t imagine that someone would believe, no matter how negative they are, that the end of the world is a year or two away. So much can happen. Taking part of my savings and investing into such a scenario is something I might consider at some point. But not until I had a lot more to invest in.

The Alternative Approach

Instead of trying to move my entire assets to protect myself from a difficult environment, I try to use strategies that will do well in any environment. It’s not a perfect method (because such a thing does not exist) but using strategies such as buying a sustainable and diversified portfolio limit the downside in case of a financial collapse. It’s not perfect but I’d argue that very few of us can afford to always be ready for such an event.

Do you feel like your investments provide protection from the worst case scenarios? If not, do you mind?