Over the last 50 years, diversification of investments has been defined as a mix of bonds, stocks, cash, and sometimes natural resources.
A USD diversified portfolio will lose value as USD depreciates, taking away wealth from stocks, bonds, and cash.
The alternatives for true diversification is natural resources, international investing, or alternative currencies.
Natural resources will likely go down in demand if there is a deflationary economy. Gold may do better , but unless there is a financial system crisis it won't explode in value. However, I do expect it to do well as it is an alternative to USD. (stocks GDX, GDXJ, GOLD, RGLD, and SLV)
Other currencies may do well, but I would expect turmoil if USD is devaluing. Some countries, like Norway, currency did very well in 2008, and you could buy stocks in that country as a hedge of both currency and income. Most investors are not sophisticated enough to purchase foreign companies, but some are available on US stock market. It is a viable option for true diversification.
The problem is very complicated, as I shared in post "The world needs to move past a 'reserve currency'.
What we need is a new solution that currencies around the world can remain stable and 'fair'. The closest thing to a new innovation in currencies is Crypto currencies.
Therefore a truly diversified portfolio would be stocks, bonds, natural resources, foreign companies, crypto currencies, and cash.
I am a big believer in Crypto's for the next stage of the unfolding economic crisis, however I am hoping gold is a big winner first.
Consider opening an account to purchase Crypto's now and get setup, buy $100 bucks of cryptos and start to learn. Crypto's right now are not a perfect storage of value, but it does have advantages over gold. First and foremost, it is the likely future of the world's currency challenges. By setting it up now, you have a new lever for moving wealth.
Use the link below, and I'll get $10 bucks for opening an account.
https://www.coinbase.com/join/murphy_b9f
Consider trying out Bitcoin (as its the 'gold' standard). Although a coin is worth about $11K, you can buy $100 worth (a fraction of a coin).
Consider Bitcoin Cash and Lite coin Trust as they will be listed as a trade-able stock ticker (BCHG & LTCN. I expect easy access to drive prices up. (click to read)
If you want to move money to any currency, any country, and buy any stock in local currency, I highly recommend https://www1.interactivebrokers.com/ , however it takes quite a bit of work to understand AND avoid pitfalls that will cost you dearly.
As always, consult a professional financial advisor!
Good luck!
Additional thoughts
Historically when stocks go up, bond rates go down, and when stocks plummet interest rates (cost to borrow) goes up. This diversification worked well through 2008. Since then the Federal Reserve bank has been actively suppressing interest rates both at federal and now commercial level. The result is rates that are at historic lows with the Federal Reserve promising to force rates lower.
That has forced money to seek returns, which is heavier into stocks. But what if stocks start a new down trend, where to put money? The answer 100 years ago was flight to safety, gold. Back then gold was tied to money so the 'value' of each dollar was preserved as there is a shortage of dollars in a deflationary period.
There is still some truth to this, but not as reliable.
Many will chose to remain in bonds even with near zero interest rates as not losing value is better than gambling on stocks or resources. But even this is a choice, what if USD devalues?
Since March of 2020, the USD has depreciated by 10% compared to other currencies. USD denominated debt, including 'derivatives' is about 500 trillion. The US stock market is total valued of US stock market is about 35 trillion. I am sharing these numbers to illustrate the impact of USD valuation has on the world economy, and why the USD has been so strong for so long.
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