Crash Proof Your Portfolio with Non-Correlated Investmentsby Evan Beecham on 09/02/15
“The only sure thing about luck is that it will change.”
– Bret Harte, American author and poet
It’s been a wild, wild ride the last week. Stock markets around the world plunged on Monday, August 24, beginning with an 8.5% percent drop in China’s benchmark Shanghai Composite index. Stock markets in Japan, South Korea, and Australia followed China down. That sparked selloffs in European markets and a dramatic, historic 1,000 point dive of the Dow, with a partial comeback by the closing bell. The S & P 500 Index fell by nearly 4 percent on Monday, following sizeable losses last week.
China’s Shanghai Index continues to drift downward, meanwhile, U.S. stocks rallied yesterday, August 26th and the Dow gained more 600 points in a single day, the biggest one-day increase since 2011. U.S. stocks have continued to climb since (with substantial daily ups and downs), yet remain nearly 6% down from one month ago.
China’s popping stock bubble (on a downward plunge since June) and weakening yuan are the most-often-named catalysts for the recent stock market volatility. And this drives home a fact we would be well to take note of:
We live in an interconnected world in which the stock market can be crashed for many, many reasons, ALL of which are out of our control.
If your money is in the stock market, it is affected by:
decisions, policies and elections within our government
decisions, policies and elections in foreign governments
terrorism and political unrest around the world
mega-crimes from Madoff and Enron schemes to big bank price fixing scandals
the many factors that affect company values, from the health of a CEO to commodity prices
disruptive technologies that make yesterday’s successes obsolete
the weather and natural disasters, from droughts to earthquakes
and the list goes on and on.
“Where are stocks headed next?”
This is the obsession of the financial media’s analysts, internet articles, and talking heads on TV. And the truth is, absolutely nobody knows with any certainty. It’s nothing but speculation. Analysts speculate what they think will happen, then explain why something else happened instead.
Sir Ernest Cassel, a 19th century British merchant banker and capitalist, put it this way:When I was young, people called me a gambler.
“As the scale of my operations increased
I became known as a speculator.
Now I am called a banker.
But I have been doing the same thing all the time”.
Wall Street is simply Vegas on a much larger scale, wearing a suit and tie.
Phil Bodine asks his clients, “How much money would you have today if you just hadn’t taken any unnecessary risks?”
It’s an excellent question that every investor should be asking themselves. And if you’re like most, you’ll have to count the cost of the unnecessary risks and gambles that didn’t quite pay off as you hoped.
We advocate Prosperity Economics products, processes and strategies that are NOT affected by market whims, do NOT require a crystal ball, and make PROTECTION of assets rather than speculative gains their TOP priority. Why?
Because we take rule #1 – “Don’t lose money” – seriously.
Because we think there are better things to do with your emotional and mental energy than watching stock charts and worrying how global political and economic changes will affect your personal economy.
Because “typical” financial strategies such as “Max out your 401(k) in mutual funds, cross your fingers and hope it all works out” don’t even produce the best results!
And because we refuse to give our clients false security.
The stock market may or may not bounce back to its pre-August-2015 shake up levels in the near future. But if that’s what you’re waiting for, stop and think:
Are you really “gaining” if the gains aren’t locked in and every day you roll the dice again?
Why does it matter what today’s stock market prices are if you don’t know what tomorrow’s will be?
Are the “gains” you’ve made in the market gains you can count on and actually spend?
The chart below illustrates the last five years of the Shanghai Index (orange), The Dow Jones (pink), and the S & P 500 (blue). Do you REALLY want to leave your future prosperity and peace of mind up to whims of the market?
Our recommendation: It’s the same today as it always has been, it is time to get out of the stock market and the same recommendation we were making before the Great Recession stock crash.
Get out of the stock market and put your money into stable financial vehicles that are sustainable, reliable, and will grow your money while protecting it.
As our free eBook “Financial Planning Has Failed” details , I have come to believe that our current financial strategies are literally INSANE, and we MUST start to save and invest differently if we want to guarantee the prosperity of our families and our nation.
We recommend strategies for asset growth, cash flow, and saving that are non-correlated to the stock market.
This is the KEY to crash-proofing your investments. Some people like to “hedge their bets” by betting against the stock market while also participating IN it. But why not simply get out of speculation altogether and invest in solid non-correlated vehicles with a long history of earning in spite of market conditions?
For growth: We advocate life settlement investments that capitalize on the secondary market for life insurance policies. (If you aren’t familiar with them, contact us for further information including a short video that will explain this asset class favored by investors such as Warren Buffet, Bill Gates, Merrill Lynch, UBS, and many pension funds.)
In a nutshell, some seniors who no longer want or need their life insurance policies and who have a short life expectancy due to age and health prefer to SELL their policies so that they can put money to use now, while they are still living. These policies are purchased as investments, often in the form of private equity funds, and create a win-win for investors as well as seniors.
With the stock market, you purchase and hope the prices rise, hoping to gain equity. With life settlements, the gains are as guaranteed as death and taxes (literally), the only educated guesswork has to go with the exact timing and costs.
For cash flow: For those with only modest sums (as little as $25k), we recommend short-term commercial bridge loan deeds of trust – currently paying 7% and upwards, and for accredited investors, we recommend bridge loan funds that are delivering low double digit returns in steady monthly payments.
For those who want reliable monthly payments and the option to contract with a company who sources the loans and holds a second position for added security, commercial bridge loans offer impressive protections for principle along with very healthy cash flow.
For those who have money trapped in taxable accounts, we can offer strategies to help more of your dollars end up in your OWN pocket than in Uncle Sam’s!
For cash: First of all, we recommend that people SAVE and not simply “invest”! We have lost the art of saving in this country, and it seems that everyone wants to skip that step and go straight to “investing” – or should we say, speculating!
For those who want a long-term strategy to store cash where it can grow in a tax-advantaged environment and be protected from the increasing privacy and security issues facing banks – while remaining liquid and easily usable as collateral, we recommend exploring high cash value dividend-paying whole life insurance.
While not a fit for everyone or all situations, for those who have a decade-plus time frame to save and qualify (or have insurable interest in other families or business partners), cash value insurance can provide an ideal foundation that can help you optimize many OTHER aspects of your personal economy. For those with financing needs (cars, business, college) and/or for those who wish to have an efficient asset transfer strategy, we invite you to contact us for more information on how this life insurance can benefit you (while you’re living!)
Is it Time to Crash-Proof Your Portfolio?
© Beecham Financial Services & Partners 4 Prosperity