Wealth preservation will soon, if not already, be the biggest worry for citizens with pension funds, retirement funds and superannuation funds.
Wealth preservation involves safeguarding your assets in a way to ensure that the value of your assets does not decrease or erode.
Most countries in the western world are currently experiencing an ageing population and are reliant on having enough money to support their lifestyle in retirement. As a consequence, many of their governments have all gone on a spending spree in a bid to keep businesses and industry going. To top this off, the Coronavirus pandemic has further increased government spending to an unsustainable level which continues to grow larger each day.
The result of these massive debt levels can only result in currency devaluation, eroding the purchasing power of individual’s savings and forcing them to work longer (if they can get work) or rather sacrifice the lifestyle they are accustomed to.
Debt as a percentage of GDP in G20 countries
There are a few key ways to preserve your purchasing power:
- Buy Appreciating Assets
Firstly, you have to buy appreciating assets and not depreciating assets like currencies or be more selective in the currencies you hold such as the Swiss Franc and Singapore Dollar. This can easily be done in a few ways but the simplest is probably opening a TransferWise account online and just hold these currencies in your account.
Unless you are familiar with the multitude of Crypto’s, it is common practice for investors to gain an exposure predominately to currencies such as Bitcoin (BTC) and Ethereum (ETH). The problem with currencies is they are not finite and therefore governments can keep printing (as above). BTC for example has a finite number which means once that number is reached, (21 million with 4 million estimated to have been lost) no more can be made and there are only 2,500,000 left to be mined. Hence, BTC is becoming more scarce while the USD is becoming more and more plentiful.“Morgan Stanley Strategist Recommends Bitcoin as Central Banks Ramp Up Money Printing.”
- Gold (and other precious metals)
Gold should be looked at as a store of wealth and a wealth preservation tool which has been the case for thousands of years. Famed investor Warren Buffet has criticised gold for years because it does not pay you anything to hold it but recently Buffet has sold his airline and banking stocks and gained an exposure to gold. Analysts have predicted that the presidential election outcome could collapse the U.S. dollar and send the prices of gold and bitcoin skyrocketing as investors seek an alternative safe haven for their capital.
For more article on gold, read about Investing in Gold from our previous post.
I will give some ideas of how to get exposure to the three points listed above in future articles.
New to investing? Read about How to keep your investment decisions simple.
This article does not take into account the investment objectives, financial situation or needs of a particular person or entity. Before acting on any investment strategy or advice you should first consult with your current ASIC accredited investment professional or seek out a compliant investment professional for such.