The Oddity Doctrine


Defensive Strategies for Life’s Rare Occurrences


 
By Anthony Rhodes

 

 
There’s a good reason why many contracts have Force Majeure clauses written within them. This safeguard is in place to limit the liability of one party from another, in the unlikely event that an odd or unforeseen act occurs, which may hinder or limit the performance of the product or service being purchased.

These indispensable additions rarely, if ever, come into play, but nonetheless are notable mainstays within such legal documents. So much, in fact, that no competent businessperson will ever disseminate an agreement without one, and if they hire an attorney who constructs a contract with its absence, he or she will be justifiably shown the door, with the fastest and most immediate of haste.

This seriousness is warranted because although rare, if these disasters take place during the duration specified within the contract, the financial fallout to the proprietor could be catastrophic; resulting in their entire enterprise being at risk.

Investors should also approach these possibilities with such caution, and seek to employ defensive strategies to protect their portfolios from the downside caused by these so-called “acts of God”.

The Gold Standard

Every investor should have a portion of their portfolio invested in gold as insurance against life’s rare events. When unforeseen acts occur, our basic instinct is to flee to safety, and there are very few safer havens out there than that offered by this precious metal. Gold generally trades in an inverse relationship with the market, which makes it an ideal choice during odd occurrences. As the equity portion of your portfolio heads downward, your defensive strategies should promptly kick into gear, and gold should lead the way as a primary counterbalance to help offset the losses experienced during these uncommon events.

They're Called Staples for a Reason

 
Even during life’s oddities, particular items can, and will, be purchased. One can’t imagine being forced to remain in their residences for prolonged periods of time without certain products on hand to help make their necessary exile as comfortable as possible. This is where consumer staples comes into play, and highlights exactly why they should be a compulsory part of your defensive strategy. Coupled with other creature comforts like cell phones and wifi access, your portfolio should experience sharp upticks in these sectors during such times. The result being, that these securities are likely to provide a much-needed ray of hope amidst an otherwise bleak accounting of your remaining investing prospects.

Oddities are categorized as such because of the infrequency by which they transpire. While their appearances are noticeably rare in number, the fact that they ultimately will occur is not in question, with their materialization being simply a matter of time.

Furthering this line of logic concludes, that if an event is assured to take place, it’s equally prudent to ensure that we adequately prepare for its arrival. Whether our eventual rendezvous with these rarities occurs today, tomorrow, or even decades in the future, protecting ourselves from the disastrous ramifications which they are likely to produce, must not escape the scope of our investment strategies.

(Anthony Rhodes is the President and owner of wealth management firm The Planning Perspective www.theplanningperspective.com )

 


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