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Mig has asked you against what risks do you wish to protect. Perhaps you need to consider the various categories of risk. I am no expert, but several that are relevant to you spring to mind. There is institution risk--the danger that the institutions with which you place your money will fail; there is currency risk--the risk that the currency in which your income is denominated will drop in value and the risk that the currency in which you pay your bills will rise in value; and there is asset risk which would affect you were you to put some of your money into property or buy a business or stocks. Companies can go bankrupt and small businesses can fail for reasons beyond the control of the owner. If you want to buy to rent out, there is the risk that renters will trash your property. If you purchase a home you can live in you will have that use value at least, and in the event of inflation or a real estate bubble in the economy in which you reside you are protected and/or can take advantage of the run up by selling and moving some place cheap, as I did when selling in LA in 2005 and moving to Arkansas.

A standard way of hedging risks is to diversify. If you buy government bonds and hold them to maturity you face the risk of inflation in the currency in which they are denominated and the risk of sovereign default. The returns on Bunds are not very appetizing just now but that might change. They would have the advantage of being denominated in a currency in which you have expenses. I liked Chris's suggestion about Norwegian investments. You might check out one of his fairly recent diaries to see why. Norway is an oil and gas producing country with a sovereign wealth fund. And it would diversify your currency risk.

The world economy seems very unstable now and I am mostly in cash. I agree with Mig that the general situation is deflationary, but I fear that attempts to stave off deflation could result in bungling into inflation. It is hard to protect against both at the same time.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Mar 24th, 2010 at 09:36:34 PM EST
And congratulations on winning your case. I am sure you would prefer not to have had the damage, but given that you did, it is good that you are being compensated. I was not previously aware of your situation in this regard.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Mar 24th, 2010 at 09:41:11 PM EST
[ Parent ]
Perhaps you need to consider the various categories of risk. I am no expert, but several that are relevant to you spring to mind.

See my diary on Risk risk.

I'm reading Fabozzi's Bond Markets, Analysis, and Strategies. In it, there's the following list of sources of risk for bond holders:
Bonds may expose an investor to one or more of the following risks: (1) interest-rate risk, (2) reinvestment risk, (3) call risk, (4) credit risk, (5) inflation risk, (6) exchange-rate risk, (7) liquidity risk, (8) volatility risk, and (9) risk risk.
Risk risk? WTF is that? A typo?

A standard way of hedging risks is to diversify.

But systemic risk is not diversifiable.

The question is, what does JD want to do with his money? It appears that one answer might be to turn it into an annuity, and protect that annuity against inflation. But he also wants to buy a house or find other profitable uses for the money to make it "grow". But if you don't know what you want the money for, why do you want to make it "grow"? To have a bigger pot you don't know what to do for?

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Thu Mar 25th, 2010 at 05:25:38 AM EST
[ Parent ]
Something which is very important to consider is the timeframe. When do you actually need the money? For how long can you leave it untouched?

Given your situation I'd put the vast majority of the money in a bank account or a really cheap money market fund, a certain fraction in blue chip corporate bonds, and an even smaller fraction in shares of stable conservative "boring" companies with a pretty predictable income stream. Like a shipping company with all its ships on multi-year fixed price contracts and the customers having a low counterpary risk, or a utility in a regulated environment, a mining company with fixed price deliveries, and so on.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Mar 25th, 2010 at 08:58:38 AM EST
[ Parent ]
Throw in a basket of sovereign debt for good measure.

But basically, to follow your advice means to stay clear of financial advisors and managed funds and to manage your own portfolio.

The brainless should not be in banking -- Willem Buiter

by Migeru (migeru at eurotrib dot com) on Thu Mar 25th, 2010 at 10:40:20 AM EST
[ Parent ]
In 99 % of all cases, financial advisors are salesmen. They work for a bank or a fund and sell their own products to naive trusting customers who believe the bank is some kind of nice utility, doing what's best for the customer. It's like asking Harry at Honest Harry's Used Cars for "advice" on which used car to buy.

Actually, I've visited one of these 1 % of independent investment advisors, who taught me a lot of good basic stuff. I spent maybe 10 hours with him, and in the end he decided to waive my fee if I promised to keep him up to date on peak oil and stuff.

Still, I wouldn't diss all mutual funds. I have some money in one fund, which actually manages to beat its index (MSCI World) year after year after year. Further, the basic fee is not horrendous; 1 %, and it can rise to as much as 2 % if and only if the manager beats his index by a considerable amount.

I tend not to give out investment advice, especially not online, do your own due diligence, etc etc, but if someone for any reason want to put money in a fund, this is one of the best.

Still, I want to elaborate that in a portfolio as conservative as what I suppose JD wants, shares and share funds should only be a small fraction of the total capital.

Anyway, here it is.

https:/www.skagenfunds.com/Funds-and-prices/SKAGEN-Global

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Thu Mar 25th, 2010 at 04:04:58 PM EST
[ Parent ]
Skagen know their business.

"The future is already here -- it's just not very evenly distributed" William Gibson
by ChrisCook (cojockathotmaildotcom) on Thu Mar 25th, 2010 at 07:49:55 PM EST
[ Parent ]
Thanks Starvid.  Thanks everyone for the input, infact.

Yes, I'm am not particularly looking for investment advice per se, but rather a list of things that I can bring with me to a meeting with an advisor and ask "what about these vehicles for investment, what's your take?" instead of being at the mercy of a salesman who wants me to invest in American mortgage backed securities.

But I thank every one for their input and think I've gained some ideas to bring to the table as well.

Thanks all

"Schiller sprach zu Goethe, Steck in dem Arsch die Flöte! Goethe sagte zu Schiller, Mein Arsch ist kein Triller!"

by Jeffersonian Democrat (rzg6f@virginia.edu) on Sat Mar 27th, 2010 at 08:41:29 AM EST
[ Parent ]

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