How to Build a Portfolio That Will Survive Any Crisis

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Since 2008, my readers have made a fortune using the “glass half full” investment approach.

I’ve urged readers of my Retirement Millionaire advisory to invest in the U.S. through stocks, real estate, and municipal bonds.

I’ve repeatedly highlighted that the U.S. economy isn’t booming… but it’s doing well enough to reward investors.

The results have been spectacular. Retirement Millionaire subscribers earned 20.8% over the past two years alone.

As crazy as it sounds, it’s unconventional to take the glass-half-full approach. So many people were burned by the 2008 crisis that they can’t believe things are actually improving.

But here’s the thing…

Investing with a glass-half-full approach doesn’t mean you have to take on lots of risk. It doesn’t mean you have to be exposed to all of the potential problems you hear about… like a recession… or emerging-market turmoil… or major economic problems in China.

In more than 30 years of investing – both as a private investor and during my time at top Wall Street investment bank Goldman Sachs – I’ve noticed many investors make the big mistake of becoming “wedded” to one way of looking at the world.

Too many people make “all-or-nothing” bets with one belief in mind…

For example, you have “doom and gloom” investors who believe the world is about to enter a depression. These people won’t buy stocks or bonds because they think the world is about to go bankrupt. Their preferred investment allocation is often “gold and guns.”

On the other hand, you have investors who go way overboard in the other direction. They put all of their money into stocks… or they put their whole retirement account in the stock of the company they work for. If that company goes bankrupt, those folks lose it all. Employees of Enron and Worldcom learned this lesson.

You simply don’t have to make all-or-nothing bets.

You can design your portfolio to handle all kinds of market environments.

For years, my job at Goldman Sachs was to develop hedging strategies for wealthy clients and corporations. The goal with these strategies was to protect people and companies from unforeseen events.

During those years, I learned that wealthy, successful investors almost always own plenty of hedges and insurance. They consider what could happen in worst-case scenarios and take steps to protect themselves.

Many unsuccessful investors live with “blinders” on. They put too much money into one idea. They don’t consider exit strategies. They don’t own much insurance against infrequent, but significant events. This leads them to take huge risks that can wipe out half – or more – of their retirement accounts.

Although our readers have made a fortune with our ideas, it’s important to consider unlikely events that could rattle the markets. It’s important to know what kind of things we should insure against…

Could the U.S. dollar drastically fall in value? Sure… but it’s unlikely.

Could China suffer a big economic slowdown? Sure… but it’s unlikely.

Could there be another major terrorist attack against the U.S.? Sure… but it’s unlikely.

I can’t tell if any of these things will happen.

I can’t tell you they won’t.

I don’t need to.

I just need to stick to an “all-weather” investment approach that includes safe, blue-chip stocks… some cash in reserve to take advantage of bargains… safe municipal bonds… and an allocation to gold or silver as wealth insurance. For most people, around 3%-5% of your portfolio allocated to that kind of insurance makes sense.

I’m still investing with the glass-half-full approach. I’m still more optimistic about U.S. investments than most anyone else. But I stay diversified for safety. And just like I own car insurance and hope to never have to use it, I own gold and silver and hope to never have to use them.

With this in mind, you can be ready for whatever the world throws at you.

Ed Note: Dr. David Eifrig Jr. is the editor of Retirement Millionaire, a monthly advisory which shows readers how to live a millionaire lifestyle on less money than you’d imagine possible. He is also the editor of Retirement Trader, a trading advisory which shows readers a safe way to double or triple the gains in your retirement account, with much less risk.

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