I have to say I remain a bit pessimistic about today’s economy in regards to our debt bubble, our banking system, and our potential issues with inflation. I believe the stock market is historically showing trends of a tremendous downturn that could be very drastic in the near future.
What comes to mind when you think of safety and reliability? There has to be a better answer than besides our mattress or an actual vault.
Saving money has become widely unpopular due to our low interest rate environment over the last decade.
Retirement income, a paid-off house, positive cash flow, and a debt-free lifestyle are the first things that come to mind in regards to safety. However, when it comes to saving in a low interest-rate environment, it’s not as simple as buying a bond or opening up a savings account, which is why I want to share with you some ideas on saving money, preserving capital and compounding it with a safe yield.
For absolute preservation, I think you have to start off the market of precious metals. Think of this as financial insurance. The benefits are a long-term historical value, recognized globally, off the books (private), that can make for a great “start over” fund in a worst-case scenario.
Mutual company, overfunded, dividend paying, Cash-value whole life insurance. Yes, that was a mouthful! The safest private businesses in the world are mutual insurance companies, and many in this group have been around for more than a century. They’ve already gone through 3 currency changes in the U.S., and are on their second world reserve currency since the mid-1800s. Never missing a single dividend, this cash-rich business is a great way to save, grow your wealth, and even earn a return on your expenses/purchases.
The most difficult thing to explain to my fellow savers is that this has nothing to do with the life insurance. There is a rider on these policies that suppress the cost of insurance and take away 70-80% of the agent’s commission. The rider also directs the dollars on day one into the growth component of the policy, instead of the cost of insurance. The insurance contract has guarantees that it has to pay a cash valuation every year. It is a “banking alternative” that will yield 3-4 x’s better than banking institutions. Think of the life insurance as the wrapper on a Snickers Bar: you care nothing about the wrapper, it’s what’s inside that matters. Banks close down by the thousands during some downturns, but when it comes to private mutual insurance companies, you’ll never hear of it. .
What asset that you know of is liquid, tax efficient, safe, private, has a competitive rate of return and can use it to have your money work for you in more than one place at a compounding rate? I personally do not know of any!
Single-family homes are without a doubt one of my favorite ways to save. It’s owning a cash-flowing hard asset that will always be in high demand. Diversification is key here!
Safe, boring businesses that dominate their space or are a utility monopoly. When looking at a 10-20-50-year savings strategy, don’t worry about the day-to-day ticks in the stock market, or even a multi-year bear market. Ask yourself if this business will be around and if they will still be great in a decade. If the answer is yes, then I think that holding a core position in great cash-rich businesses is a great way to save.