Liberty Maven

What a ride it has been the past few weeks on the market!  Freddie and Fannie have now cajoled the government into providing a bailout; meanwhile, Bennigan’s, Steve and Barry’s, and other companies began closing their doors.  In such a volatile time, how do we remain confident that we’ve made the proper investment choices?  Remember, diversification.

Hedging against inflation

I am a strong advocate of, in a high inflation environment, holding 5-15% of one’s portfolio’s NAV (net asset value) in gold, silver, platinum, or palladium.  Such metals are a strong ‘hedge’ against inflation, meaning they almost always go up in value as a currency decreases.  There are a few methods of purchasing these metals, but I’d warn against purchasing an ETF linked to precious metal; true ownership is the best scenario in case of a market crash.  Both home ownership and overseas holding are the best two options, although the government has seized gold before.  If one is looking into purchasing gold/silver, bars are almost always better than numismatic purchases, as one does not pay the collector’s overhead on the coins.  That being said, there is also a good market in junk silver, where a large discount is to be had.  Be creative, and one can often purchase many ounces of silver at a significant discount to melt price.

Beyond gold and silver, one can also store some of their money in more well-managed currencies, such as the Swiss Franc.  This is a more complex investment strategy, but is easily accomplished through such online brokers as Interactive Brokers, who can put one’s cash deposit in any currency  within their Forex database.  Alternatively, one could hold the currency itself, but may find convertibility to be an issue.

Positions written about in the Free Investor are purely the opinions of Alexander Drummond and the Free Investor staff.  Tomorrow and Sunday, this series will be continued with a segment on Overseas Investment, as well as possible U.S. stocks that can survive economic recession.  Following that, the Free Investor will be on a 3 week vacation, after which we will transfer to a twice-weekly program with posts on Tuesdays and Fridays.