A major topic right now is inflation. Whether you believe that we’re going to have a hyperinflationary collapse or simply a period of higher inflation, you need to know what to do about it. This is another one of those insurance policies I talk about.
Hedging is a well-known financial concept that is basically taking some action in order to offset the risk or minimize the exposure to something you are concerned about. In this case, we’re hedging against the dollar losing value due to inflation.
We already hedge all the time in our life with things like car insurance, home owners insurance, etc. The big financial bigwigs hedge on a regular basis as well. One very common way people hedge is to fill up a heating oil or propane tank when the price is low, leaving you with a year or so to find another low in the price curve to take advantage of. This is just plain good sense!
The most common hedge against inflation that everyone knows about is the purchase of precious metals like gold or silver. I’ll also talk about offshore investments and localized investments in hard assets, but let’s start with the fun stuff!
If you haven’t read my post on using metals to protect yourself from inflation, you should definitely go read that. I promise that I’ll wait until you get back.
Now that you’ve read the background material, here are my personal opinions on precious metals
I personally stay away from gold in large quantities. This is mostly because it’s hard to use it in daily commerce in any sort of barter or TEOTWAKI situation. Silver and to a much lesser extent the nickel make good sense to me. Think long and hard about what you need and make your decisions accordingly.
Personally, I’d put most of my money in junk silver, with some 1oz silver eagle coins. I’d put some into ¼ oz gold eagle coins as well, just to have some density. I avoid bars and 1oz gold coins because in my opinion they’ll be just too hard to use when it all goes Zombieland on us.
One last tip: If you have money in retirement funds like most of us do, look at the option of diversifying out of the standard mutual fund choices and buying Silver ETF (Exchange Traded Funds) or similar investment vehicles. It’s hard to get cash out of your retirement fund, but this can help you against a stock market disaster!
Offshore investments are pretty straight forward. You have money or other assets held in an offshore account of some sort. For example, you could get yourself a brokerage account in the UK denominated in Pounds or Euros that holds positions in non-US equities.
This makes sense on a couple of different fronts. First and foremost, this is a hedge that will not be particularly useful for you in a barter society. It’s really a pure dollar value play that protects you from inflation and not much else.
On the other hand, if you were to put your money into real estate or something along those lines, you could have a secondary non domestic place to “vacation” if things get really hairy in this country. There’s something to be said for that.
Personally speaking, I don’t use this as a hedge at all, but I know people that do and swear by it. I include it so that you can make your own decisions about whether this makes sense to you or not.
Localized Investments in Hard Assets
This is where you purchase tangible assets in or around your location. This is primarily real estate in my book. Land retains its value extremely well and makes for a great hedge. This is an area of focus for me, as I see it being a great way to prepare for the future.
You can buy a large plot of land with the intent to relocate there, or you can simply buy some land as a bug out location, and use it for vacations in the meantime. It’s really up to you.
I wouldn’t recommend buying rental properties and the like unless you know what you’re doing and you’re careful about where you buy them. That said, if you have the cash lying around to go and buy rental properties, you probably already know what you’re doing!
Be careful when buying land that you don’t take on unmanageable debt. This is one area where I am willing to bend my no debt rule a little bit if you must, but once you have that land, you must focus on paying it off quickly.
I spend a fair amount of my prepping money on improving the land that I own. I find it to be a good investment and by improving the infrastructure I reap benefits both now and later. Now, because the more I do out there, the nicer it is to stay there. If I ever have to bug out with my family, or decide to move there full time, my investments are already there and its one less thing to worry about.
Investing in land is something I highly recommend everyone do. There’s a piece of land for every budget, you just have to go find it.