When we build a portfolio of high-quality dividend paying stocks and bonds, we are “crash-proofing the money” (to use the term from a local radio ad) from the big and real threats of recession and hyper-inflation. A portfolio protected from the one but not the other is asking for trouble because both are equally adept at destroying purchasing power, which is to say destroying wealth.
Presently we are bombarded with advertisements for investment strategies and products that are inadequate protections even though they are quite expensive. They are like the high stone wall that goes two-thirds of the way around the chicken coop. The wolf is still going to get in. Into this category goes gold and annuities. They are very costly vehicles but more to the point they are insufficient certainly as compared to a portfolio of carefully selected high-quality stocks and bonds, such as we construct.
As to the time to act, we already did. We crash-proofed (again, that term) the portfolio when it was inexpensive to do so, back when the markets were stable. At that time it was difficult to accept subdued returns when junk stocks and bonds were soaring, as they were in 2009 -10, but that is when you want to design an all-weather diversification against recession and hyper-inflation – – when it is inexpensive. In any event, we are ready for whatever happens in coming sessions.