I guess many of us wonder, why did all the great advice we received from the investment community serve us so poorly as we struggle through the current recession and observe the massive destruction of wealth. Perhaps it was our own desires for win win positions which drew us towards a particular type of investment strategy. Boom and Bust scenarios go back along way and I was particularly struck by some investment advice from Jacob Fugger the Rich. Jacob Fugger was born 550 years ago on 6th March 1459 and became one of the wealthiest men in the world through trading and merchant banking during his life of 66 years. When he died he bequeathed to his nephew Anton Fugger assets totaling 2,032,652 guilders.
His investment strategy is interesting and was designed for turbulent times.
“Divide your fortune into four equal parts: stocks, real estate, bonds and gold coins. Be prepared to lose on one of them most of the time. During inflation, you will lose on bonds and win on gold and real estate : during deflation, you lose on real estate and win on bonds, while your stocks will see you through both periods, though in a mixed fashion. Whenever performance differences cause a major imbalance, rebalance your fortunes back to the four equal parts.”
We are clearly in a deflationary period here in Ireland, but we also must accept the chance that Governments globally will attempt to monetize the significant global debt in tandem with providing ongoing stimulus. Therefore we could see a return to inflation. Inflation in fact is probably the only manner in which many householders can eliminate their negative equity.
It would be interesting to know which investment advisers were suggesting a portfolio with the kind of balance that Jacob Fugger suggested and how they have performed through the current recession. What would such a portfolio look like today ?
No comments:
Post a Comment