Where to invest during a recession?
40% of Americans do not have $400 in their savings to meet an emergency.
Let that sink in for a second.
Average rent expense in the US is around $1050, that means, 40% of Americans cannot afford to pay rent for two weeks if they lose their job.
The emergency fund was not even talking about cases of a job loss or these pandemic times that we are facing.
It was referring to unplanned expenses like car repair, illness, etc.,
Nevertheless, the stat is quite staggering.
Good news is that the pandemic has forced people to increase their savings by 33%.
Whether this savings is voluntary change in habit or forced by lack of spending is something we have to wait and see.
We have to do whatever we can to get by this wave of the pandemic.
However, once we are on the other side of this we all have to think about being prepared, financially speaking, for uncertainties that life throws at us
Here are the assets we think will bode well whether the economy bounces with full vigor or we face another crisis like this in the future.
- Cash, specifically the US dollar
- Gold & Silver
- Farm land
- Upgrading skills
Why these assets?
Everyone has a reason to be invested or avoid investing in a certain asset. We have our own reasons. We enumerate them below.
In the current market, you cannot go into a grocery store and buy stuff with gold or silver coins.
While many places have started accepting Bitcoin and other cryptos, they are not easy to integrate into daily usage, yet.
For these reasons, it is easy to see why having a reserve of fiat cash is common sense.
However, we think that as the global fiat system starts falling apart, the US dollar will outlive most fiats.
This is why when we say cash we are particularly referring to the US dollar.
If you live in a country where USD is not something you can get hands on easily, you could look into reliable stablecoins to get exposure to the US Dollar.
Eventually, the US Dollar may head for the same ill fate as the other global fiat currencies and that is why it is important to have exposure to other assets.
How much cash should I hold?
Personally, we think a 6 months safety fund is a good aspiration to have. If you can manage a year worth of expenses in savings, that is quite astounding.
A minimum we would start with is 3 months expenses.
Whatever those mean to you from a dollar perspective should be your ‘goal’.
Why Gold & Silver?
Gold is considered god’s money. Whether Gold is god’s money or not, it withstood the test of time and has been a successful store of value for ages.
Silver has been used in variety of fascinations (including references to the use of silver in weapons against witchcraft, vampires and other fictions).
More importantly, Gold has been a metal of royalty while Silver has been long used as the metal for commoners.
Together, these two metals have been used as store of value and medium of exchange since we moved away from the barter system.
How much Gold & Silver should I hold?
Answering this for the Gold is tricky since it’s more expensive. Silver may be easier to answer. For instance, you could start buying 1 ounce silver each month.
Depending on what your ‘end goal’ from an investment outlook is, a 3-5% allocation to Gold & Silver might be an appropriate mix.
Why Farm Land?
There are only few things that could exceed the confidence you acquire by growing your own food.
By farmland we do not mean acres and acres. There is a guy who sought to use the empty backyard space of his neighbors to grow vegetables on a ‘sharing’ basis.
You could grow greens like Spinach that don’t need a lot of space.
As you keep digging into this area, you can come up with creative ideas on how to become self-sustained.
You do not have to turn into a farmer to invest in farmland either. There are many solutions that help you own a piece of a big farmland through crowd sourcing.
Companies like AmericanFarmInvestors helps you invest in farmland through 401(k).
If there is a power outage or if China stops producing or if there is a famine in the countries that supply the food, cash or gold or bitcoin will mean not much.
Food is obviously a basic necessity and as such – having it as part of a sustenance plan is a good one.
We are not talking about it from an apocalyptic preppers point of view.
We are talking about it from an ‘I am ready for all possibilities’, the good ones and not so good ones, point of view.
How much land could help?
How much land could help you produce your own food and basic supplies? That depends on your family size, appetite, your fancies, where you live, how expensive the land is, and more.
You do not have to become a farmer or buy entire acreage. There are many solutions that help you invest in a Farmland through crowd sourcing.
So you could be investing a few hundred bucks each month or have an annual ‘goal’ for Farmland investment.
We are a crypto site, that’s why.
We are just kidding.
Bitcoin has the potential to lay the foundation for the future internet.
Unlike the internet itself where one could only invest in the companies behind the technology, with Bitcoin you can invest in the technology itself.
If all else fails, your Bitcoin holding will be a great souvenir of ‘history in the making’.
Bitcoin is Gold 2.0. Or in Robert Kiyosaki’s words “Gold is god’s money and bitcoin is people money.”
We will take that explanation.
What makes bitcoin better than gold is that you can take it anywhere with you. You can transfer, use it to buy things and divide it into fractions.
If those who proclaims that Bitcoin will one day reach a Million dollars turn out to be right, your $100 investment today could be worth $10,869. That’s 100x return.
If you do lose it all, you would have lost $100.
Except for the startup investment (which is accessible by the wealthy) no other investment we know of comes closer to Bitcoin in its upside potential.
We buy bitcoin for the upside potential and stay in to become part of the history itself.
How much Bitcoin should I hold?
Answer to that question for this particular asset class is quite simple: How much are you willing to lose and not care?
We are not kidding.
Bitcoin as a relatively new asset class has almost unlimited upside potential.
But potential is not always guaranteed to become a reality.
If you invest a small amount $100 here and $50 there and adopt the dollar cost average method, it could help hedge your portfolio well.
We personally like to be diversified irrespective of our portfolio size. You do what fits your risk appetite.
Why Upgrading skills?
This investment is the one that will keep paying you.
Let’s say you are eyeing a promotion and the only way you can get it is by earning a certification.
You could invest your money in acquiring that certificate to land the job that can increase your income.
We are not big fans of Ivy League degrees that cost hundreds of thousands of dollars. However, we do not discount the value you can gain from upgrading your skills.
Thanks to the internet, acquiring skills is not as hard as it once used to be.
You could save on the ‘preparation material’ by learning from YouTube or buying used books from BetterWorldBooks or Thrift Store, where you can.
You can even post questions or seek tips on the forums.
You can weaponize the internet to acquire the skill that increases your earning potential.
How much should I invest in upgrading my skills?
This is an asset that is non-tangible and yet reaps the rewards faster and more tangibly than others on this list.
How much should you invest directly depends on your next natural progression trajectory.
For instance, if I don’t have a basic under-graduate degree, I cannot think about having a Master’s degree.
The cost obviously varies for an under-graduate degree to a Master’s degree.
Whether I am taking an online class or an evening class or a full time will also change the expense considerably.
If you already have the basic skillset to do your job, then investing in something that gets you ready for your next level (or promotion) is what we would personally focus on.
We do not believe in college degrees that are obsolete when taught and are useless in the real world.
We like technical (polytechnic) diplomas that provide hands on ‘experience’ more than theoretical-namesake degrees.
How do I get invested in these assets when I cannot get by?
We started this article talking about people who do not even have an emergency fund of $400, how then can we expect people to be exposed to the assets we listed here.
That is quite a challenge to overcome.
Few ways we think this could be done (we have lived through life where we did not even have $50 in reserve, so this is not pure hypothetical):
- Reconcile expenses and cut the unnecessary. An example could be if you have a habit of eating out once a week, maybe make it once a month.
- Switch to alternatives. An example could be to move away from a bundled TV package to an internet only package. For instance, let’s say a bundled TV package costs $150 and Internet only costs $75, then you can add Netflix or Disney to this at an additional $10. This saving of $65 ($150-$75-$10) could go into buying either a couple of silver coins or million sats of Bitcoin or just go into your savings as fiat reserve.
- Downsizing your lifestyle. Do you have an opportunity to move into a smaller home or use public transport (obviously after the pandemic) to go to work or make your own lunch instead of eating out. Five dollars here and five dollars there will quickly add up.
- Upgrade your skill to increase your earning potential (we discussed this above)
- Start a side hustle. You could drive Uber in your spare time. You could learn trading and make some small gains. You could offer your skills on platforms like Fiverr. You could start your own YouTube channel. You could start blogging.
The strategies we have outlined in this article are not just for investment during a recession but they are sound strategies of investment in general, in our opinion.
These are the assets we are looking to accumulate because we think this is the right mix for us. You do what’s right for you.
Note: We personally do not invest in stocks and have not included them in this article. This does not mean that they are a bad investment. Also, we get involuntarily exposed to stocks through 401(k) (thanks to Bitcoin IRAs the situation is changing fast). Diversity is key to a well-rounded portfolio.
Thank you for reading and sharing this article. Stay safe and healthy!
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