We’re living in an increasingly volatile world politically, and political volatility is the single biggest threat to the stability of currency. Many people are starting to diversify their available funds by investing in gold or bitcoin, hedging their bets and mitigating their risk in the marketplace. After all, if you woke up tomorrow to news that the United States had entered the Third World War and our currency had taken a steep decline, wouldn’t you want to have gold or bitcoin to finance your lifestyle or possibly even your escape?
If this sounds like a far-fetched notion, take a look at what’s going on in India right now. The Prime Minister of India, in an attempt to curb cash-based crimes, declared all paper bills in ₹500 and ₹1000 denominations worthless. These two notes accounted for some 85% of all currency in circulation in that country, which caused chaos when people were trying to get to their banks to turn the notes in.
There are risks and benefits to all kinds of currency. Gold is universally valuable all over the world, but even small amounts can be extremely heavy, hard to convert and spend, and easy to have stolen without hope of recovery. Bitcoin is more valuable and widely accepted than anyone ever thought it would become, but there are no consumer protections in place for transactions or stolen Bitcoin.
Plastic money is becoming preferred since it is taken everywhere and there are great consumer protections in place for fraud and theft, but those protections along with transaction fees can be costly to businesses. FInally, cash is only as valuable as the government backing it and it is easily stolen and rarely recovered, making it a less and less attractive option to the younger generations.
All forms of currency can be stolen and all forms of currency can be used in crimes, so there’s not just a one size fits all solution to your holdings. Diversification is important in your retirement portfolio, so why do so few people talk about diversifying their currency? The main ideas are the same- don’t keep all your eggs in one basket so if there’s volatility in one market sector you’re covered by your investments in the others.
Learn more about currency diversification from this infographic. The world is a very volatile place, and it just makes sense to hedge your bets about the future with a variety of currencies.
Infographic via: U.S. Gold Bureau