Forum: money.stackexchange.com
Tags: <investing><gold>
Title: How should I prepare for the next financial crisis?
Question: Last financial crisis happened 10 years ago - there is the risk of another one some time in the future. I am middle class worker with an average savings. I know that investing in gold should be safe to minimise damages from the next potential financial crisis. Which other investment strategy should I choose if I want to prepare?

Answers:
sents: text: How would gold have protected you during the 2007/8 crisis?
text: In no way, shape or form.
text: The ways to protect yourself at any time are: A reasonable debt/salary ratio:
text: In other words, don't over-extend yourself on the mortgage, how much the mortgage broker says you can buy with 0% down.
text: Ditto on the cars you buy.
text: A healthy emergency fund.
text: Diversified investments Don't follow investment fads
text: If you really think that the bubble is going to pop soon, shift more into bonds.
text: (They recover quicker.)
text: Don't buy gold and silver.
text: (Hard to pay for groceries with it.)
text: Minimal CC debt.
text: Boring, huh?
answer_details: author: money.stackexchange.com/users/22266/RonJohn
score: 22
sents: text: Those ‘crises’ are only an issue if you need your savings during the time of crisis.
text: If you have time to sit it out, you should just do that, and come out of the crisis with a gain.
text: People that lose money during a crisis lose it because they sell their investments during the crisis, either because they had to or because they thought they should.
text: If you look at historic values of investments, the market overall always recovers and goes over the orignal value some time after the crisis.
text: Investing even more right in the crisisis the best way to make a lot of money.
answer_details: author: money.stackexchange.com/users/35405/Aganju
score: 6
sents: text: Your asset mix should reflect your own risk tolerance.
text: Whatever the ideal answer to your question, it requires you to have good timing, not once, but twice.
text: Let me offer a personal example.
text: In 2007, the S&P hit its short term peak at 1550 or so.
text: As it tanked in the crisis, a coworker shared with me that he went to cash, on the way down, selling out at about 1100.
text: At the bottom, 670 or so, I congratulated his brilliance (sarcasm here) and as it passed 1300 just 2 years later, again mentions how he must be thrilled he doubled his money.
text: He admitted he was still in cash.
text: Done with stocks.
text: So he was worse off than had he held on to his pre-crash assets.
text: For sake of disclosure, my own mix at the time was 100% stock.
text: That's not a recommendation, just a reflection of how my wife and I were invested.
text: We retired early, and after the 2013 excellent year, moved to a mix closer to 75/25.
text: At any time, a crisis hits, and we have 5-6 years spending money to let the market recover.
text: If a Japanesque long term decline occurs, Social Security kicks in for us in 8 years.
text: If my intent wasn't 100% clear, I'm suggesting your long term investing should always reflect your own risk tolerance, not some short term gut feel that disaster is around the corner.
answer_details: author: money.stackexchange.com/users/187/JTP - Apologise to Monica
score: 3
sents: text: In the 2008 housing crash, cash was king.
text: Cash can make your mortgage payment, buy groceries, utilities, etc.
text: Great deals on bank owned properties were available for those with cash.
text: Getting a mortgage in 2008-2011 was tough.
text: If you are worried about stock market crashing, then diversification is key.
text: Don't have all your investments in one mutual fund or sector.
text: Gold and precious metals have a place in one's portfolio, say 5-10 percent as an insurance policy.
text: The days of using a Gold Double Eagle to pay the property taxes are largely gone, although Utah does allow it.
text: The biggest lesson I took from the crash is you cant have too much cash saved.
text: Build up the rainy day fund.
answer_details: author: money.stackexchange.com/users/64180/Mortgageboss
score: 1
sents: text: There are a 2 questions you need to ask yourself.
text: When do you want to "retire" and what will that look like?
text: Will you be working?
text: What risks will derail your plan?
text: At some point, you'll either need to stop working or be forced to stop working.
text: It's at that point when you'll need your savings.
text: So what you're really worried about is - when you'll need to use your savings.
text: The most common and dangerous risk people face is losing their job and being unemployable or having a health issue.
text: These are "internal risks" that you need to deal with through mitigation (eating healthy, improving your job skills) and risk transference (insurance).
text: Don't worry about predicting the future.
text: You're making an assumption that there will be another financial crisis in your lifetime, which may be wrong.
text: We could also have a long bull market as well.
text: There's no way of predicting external risks, so don't worry about it.
text: Your investment strategy should focus on the easy things to control - diversification and asset allocation.
answer_details: author: money.stackexchange.com/users/65930/Steven Burnside
score: 1
sents: text: A somewhat provocative (but not unserious) proposal: Rent, don't buy a house to live in.
text: In 2007/8, the thing that got many people in deep trouble is their mortgage.
text: It's not a productive investment but a speculative bet on what was in fact a bubble and a class of assets that is notoriously slow to recover after a slump.
text: Before thinking about your savings or buying into silly ideas about gold, you should realise that as a middle class worker, the biggest risk after a crisis is losing your job.
text: Renting your accommodation means being able to downgrade or move very quickly and not being forced to sell a house at the worse possible time.
text: If you really do need to liquidate some of your investments at a bad time, having a more diversified portfolio means that you are not losing everything to meet some short-term obligations.
text: Assuming you're in the US, this means forgoing some nice tax advantages that might be too tempting to resist
text: (I'm not
text: so I am basing this on what I read on this site)
text: but, bubbles aside, there is nothing that makes real estate a particularly good investment as such, especially if you also live in the house you're buying.
text: You might very well come out on top but you expose yourself to several risks and are less prepared to face a crisis.
answer_details: author: money.stackexchange.com/users/11981/Relaxed
score: 0

Summary of the answers:
You should have a reasonable debt/salary ratio to begin with. The biggest risk in a crisis is losing your job. You should make sure you have cash to make your payments.
The ways to protect yourself at any time are by having a reasonable debt/salary ratio. Before thinking of investing or buying gold, you should realise that the biggest risk after a crisis is losing your job. Those crises only become an issue if you need  your savings during the time of crisis. Those people who lost money during a crisis lost it because they sold their investments during the crisis for whatever reason. In the 2008 housing crash, cash was king. With cash, you can make your mortgage payment, buy groceries, utilities, etc. During a crisis you can’t have too much cash saved.