The Zombie-Apocalypse Portfolio is a collection of investments that include exposure to alternative investments that also work as forms of money.
Crypto, start-ups, fine art and precious metals like gold and silver are examples of alternative investments.
In my younger years I’d listen to ‘alternative’ music like Fugazi, Pixies, screaming trees, Nirvana. In a way, this likely happened in the late 60’s too with my parents too: Jefferson airplane, the Doors, and maybe the Beatles.
Music not only captured what was occurring in culture, but it helped define a new people group moving through time. were there for the boomers, yet for my generation it was an entirely different cast and crew.
Most of the content you’ll hear or read about on the topic of investing will major on mainstream ways of doing it, using mainstream investments as the ingredients. There’s a larger community there, there’s options for pretty much anyone, and that’s where the bulk of well-defined regulation sits also. Most of the evidence and virtually all the thought in the investment community sits in this space too, so there’s no harm in just hanging out there with 100% of how you think and invest.
Not that it’s what the smart people do, or it’s what you really should be doing, but investing in alternatives is one way to get an edge instead of the average, while providing an insurance strategy against the status quo.
Before we get too far into this though, consider first the 5 basics of getting started (more on this in another post)
1 – Get a source of income which is greater than your expenses / Spend every dollar you make with intention, on purpose according to a plan.
2 – Get rid of consumer finance tackling the highest payments first
3 – Save 3-6 months of your income as a self-insurance fund
4- Set some SMART goals
Initially you may be investing for a deposit on your first home, then, when you do get property, you start investing in managed funds like KiwiSaver or individual shares too if you can.
I mention this, because before you ever contemplate heading off into the weeds by thinking about alternative investments, you should be able to prove you can find your way back home. Get the basics done right first. Just don’t stay in the basics forever.
Take physical precious metals like gold for example: are we hedging against something – like insurance against a really bad event, or are we diversifying our portfolios with something to enhance long term performance? There should always be a reason behind why we put money into anything, so today I’ll explain some of my own rationale for holding gold, and perhaps in the process you can figure out if it’s right for you too.
If you can own your own property, perhaps more, then try to invest in some things that aren’t just property, you’re likely going to grow your wealth with a smaller chance of losing some of it in the process. While we all have a preference for the future (heavily influenced by university, parents, and ultimately your childhood), we really can’t prepare for all events unfolding in the future. This is why we diversify.
Diversification is when you invest in more than one thing, because you know what you don’t know.
When we get zigs with some investments, the zags of other investments provides an offset. Over the long term, when you diversify, you’re more likely to get a return which will do the job. Hey on this, if you want to take a deeper dive into this topic, check out episode 178 that I did on the topic of Diverse-centration.
So why invest in gold?
Maybe it’s insurance.
Maybe it’s a speculative play for if the banking system blows up.
Maybe it’s just a diversifier or substitute for a portion of your fixed interest allocation.
Or maybe it’s an ingredient in broad portfolio of investments that gives you a form of money to be used just in case the world gets really dark.
Have more time for the Zombie Apocalypse portfolio, check out the following:
You can think of investing in gold simply, or you can go deeper. As with anything you invest in though, try to thoroughly enjoy it if you can. Heck, be an enthusiast while you’re at it. An extremist even?
Those who really get into investing in individual shares may start a share club, those into crypto may have their meet ups, passive index fund investors – I’m sure they’re a blast to be around – and then there’s the cults of frugality like FIRE and the Barefoot Investing crowd – even they occasionally get a little excited (in their own spreadsheet sort of way).
Brandy, cigars, dark red leather couches, bars of gold being stroked in front of an open fireplace. That’s my stereotypical picture of a ‘gold-bug’. It doesn’t mean you have to be like that though – I’m not.
Everybody has their reason for holding gold, and they’re not the same.
Now there’s a subtle distinction I’ll make when it comes to Gold, much like I do with Bitcoin – I may inadvertently refer to it as investing occasionally, but I think of it as holding. Much in the same way you don’t invest in cash, you just have cash – some assets you invest in, and others you just hold.
If it’s not capable of generating yield, or income, you’re just holding it.
There’s a bigger story at work with the question of why gold though: I’m not entirely sure it’ll happen in my lifetime, but considering current events you never know. Maybe gold could one day back a new type of currency though. Either the BRIC’s nations (Brazil, Russia, India and China) or even in the West through their central bank issued digital currencies (CBDC’s). It’s hard to be certain and even harder to know how that’s bullish for gold too – I’ll point out like pretty much anything we invest can in though, gold isn’t a perfect asset. In fact this is one of the reasons why I’d be open to Bitcoin with just as much conviction as precious metals – will the future require an analogue, or digital solution?
There are valid concerns with holding gold, and investors should take care not to get carried away here.
There’s no guarantee in the future there would even be a marketplace for gold outside of central banks. For almost 40 years in the US remember there were limitations/bans put on citizens for owning gold privately. Assuming it could never happen again is a bit silly. It may not always be legal to use alternative forms of money like gold, as a medium of exchange.
Then there’s the zombie apocalypse scenario where you have to use gold as money. Let’s think this through, if there really were zombies (or more likely packs of mutated feral handbag-dogs roaming the streets), we’re probably not that excited about the value of our bullion. We’re looking for food, shelter, or firearms with silver bullets. When gold is priceless, everything else we value may in fact be worthless.
So no, it’s not a perfect investment, and yes, I do have concerns about it, but here’s why it doesn’t matter if you and I are wrong about gold. There are trillions of dollars of value locked up in gold – it’s almost 10x the value of Bitcoin.
I don’t have to have faith for myself that gold has value – I can believe in the faith of others.
Even if it doesn’t make sense to me to own gold, over thousands of years civilizations have used it as money and held through extremely disruptive times.
Precious metals and some types of crypto, but mostly Bitcoin, are alternative stores of value. If I hold these assets directly, they can also be used as a medium of exchange if there’s no longer the financial infrastructure. I hold alternatives that have money-type qualities for two very different types of futures – one world is a dystopian blade runner sort of place and other is a a utopian Truman Show sort of thing. Betting on just the negative version of the future is a very natural thing for us to do, but we also need to consider the positive version of the future too. Most alternative investments have risks in that their demand can be hard to predict, and in some cases, the markets may not be that deep – by investing across more than one type of asset, and for more than one type of future, you reduce your risk somewhat here. Just remember, investing in a zombie apocalypse portfolio with alternative forms of money does come with risk that over time, things actually become normal again.
So the moral of the story so far: You don’t have to be a vegetarian to try the salad and you don’t have to be an extremist to understand how to benefit from the extreme views of others– You don’t need to believe in what you know you should believe in, for it to be real.
If you can and investing in alternative assets are of interest to you, you should get some advice that factors in how much, what forms, how to hold it, and how to transfer it on to family later on. Get some open and frank financial advice here from your own adviser – if you don’t have one, book in a 15-min initial chat here.