“The safe way to double your money is to fold it over once and put it in your pocket.” – Frank McKinney Hubbard

“You definitely need a cash position,” Porter Stansberry tells us. “And you need it to be immediate money. Not CDs, not gold. Your cash should be money you can write checks against that day.”

He’s right. Bad things can happen to your money. Stock-market calamities. Business failures. Malicious lawsuits. And worse.

In the past 10 years (and especially since 9/11), legal protections for your money have all but disappeared. Did you know, for example, that under the Patriot Act we mentioned in Tuesday’s message, any agent of the government can examine your personal bank accounts without your permission and without notifying you? And did you know that any third-string local magistrate can sign a seizure notice against you that would freeze or even seize all your assets, on the spot, without any proof of wrongdoing and without notifying you?

Sounds scary, but it’s true.

Here are my recommendations for how to protect yourself from the full range of threats to your wealth:

  • In your house or in a safety deposit box, keep (at least) enough in gold coins to equal the dollar amount of one month of your current income.
  • Keep cash — two or three months’ worth of the amount of money you usually spend — at home.
  • Keep six months’ worth of your income in some sort of cash account — one that earns interest.
  • Keep a reasonable percentage of the rest of your wealth (10% to 50%, depending on the market) in some very safe mutual fund. Alex Green (the investment director of the Oxford Club) recommends putting this part of your emergency money in either a money-market account or a money-market mutual fund. These should give you second-tier availability (not as good as it would be in a house safe but better than it would be in a CD) and should also keep pace with inflation. An FDIC-insured money-market account usually requires a minimum balance ($500 to $10,000). Find one that you can fund right now and add to it. With such accounts, you can usually write up to three checks per month so long as each check is for at least $250. If you can find one, open a tiered money-market account. These pay you a higher rate of return as your account grows.

Note: Money-market mutual funds are not bank accounts and are not FDIC-insured. They are funds in short-term loans of the government and certain corporations. Unlike other mutual funds, money-market mutual funds try to keep their net asset values at $1 per share. Returns depend on how well the underlying asset does. They are not guaranteed.

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