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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