The world is plagued by problems of all sorts. During your lifetime, chances are that you will go through periods of inflation, deflation, unemployment, rising share prices and stock market crashes. Newspapers report these problems with regularity and it seems that some of them will remain unresolved in the foreseeable future.
At the time of
this writing, most economists agree that increased consumer prices are
coming, although nobody can tell precisely when this will happen. If you
live on a fixed income, as it is the case of most pensioners, you
should view inflation as a cause of a serious concern.
media mention that a loss of purchasing power might take place within
months, danger is already looming in the horizon. If you do nothing,
inflation will catch you unprepared. If you take appropriate measures,
that will not be the end of the story either. As soon as inflation is
under control, the next problem will come to haunt us, possibly another
stock market crash.
Even if you occupy a position of influence,
your possibilities of changing society remain minuscule for the simple
reason that millions of people out there don't care about what you think
and never will. Major changes in History ultimately result from ideas
held in high regard, rightly or wrongly, by significant segments of the
population. Those beliefs evolve through generations and change very
slowly, even in the era of the internet and the global economy.
An effective strategy
an investor, you will be much better off if you realize your impotence
to bring fundamental changes to society and stop worrying about it. An
effective strategy to help other people, which is by all means a
laudable intent, is to focus your efforts on a restricted field where
your contribution can really make a difference.
rational investment philosophy involves giving up unrealistic
expectations and concentrating on what is feasible. You cannot prevent
inflation or deflation from taking place, but if you play your cards
well, you can make money from them. Instead of worrying about the
disadvantages of rising or falling prices, why don't you figure out how
to use each financial phenomenon for your personal profit?
a positive result in your bank account will allow you to devote your
gains to helping others, if that is your wish. For each disruptive
event, there is an investment strategy that can help you make a profit.
Rising share prices represent the easiest situation to deal with because
most people can figure out that there is plenty of money to be made if
you borrow at 6% interest and invest at 12% return.
rational investment difficult is our psychological resistance to letting
go of worry, recognizing past mistakes, and taking practical action. In
addition, a wise man must accept that an investment method that proves
successful in one environment frequently becomes unsuitable when the
Real estate and gold coins may be great
investments during inflationary periods, but tend to be lousy places to keep
your money when the curve turns and prices begin to fall. You certainly
don't want to be caught with a huge mortgage at a high rate when
the price of residential properties begins to fall.
It is up to you in each case to take sensible
measures to profit from the situation or, at least, to minimize its
negative consequences. As individuals, our best strategy consists of
letting go of anxiety and viewing inflation, deflation, unemployment, or any other economic challenge
just as another problem to be handled.
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