Back in the summer of 1929, the economic outlook for investors never looked brighter. Only in hindsight, once the Great Depression began, did anyone see just how important having depression-proof assets would be. This is one of the reasons why during uncertain economic times, if you're in your 20s or 30s today, most financial advisers will recommend a diverse portfolio of long-term and short-term investments that will prepare you for any future scenario. Having assets that can retain their value during an economic downturn will be vitally important should another depression strike -- unless you don't mind darning socks, selling apples on the corner and raising your own chickens.
Cash and Gold
Cash and gold are two things it's good to have on hand during difficult times. Even in the best economic periods, you should have an emergency fund in an accessible savings account representing at least three months of your living expenses. Should your bank become insolvent in a depression, the Federal Deposit Insurance Corporation will have you covered. The FDIC insures all deposit accounts, including checking, savings, certificates and money market accounts up to $250,000. Because inflation quickly reduces the value of cash, owning gold is also wise. Historically, the value of gold goes up or at least remains constant when the economy takes a nosedive.
The value of debt-free home ownership should never be underestimated. Whether you are buying your own home or considering purchasing rental properties, location should be a key consideration. The long-term value of real estate depends upon the local economy. Purchasing real estate near colleges has been proven a wise investment even after the economic downturn of 2008. The median home price in the University of Michigan's hometown of Ann Arbor, for example, was $209,000 in 2011 — far above the national median of $156,100. Ann Arbor's unemployment rate that year was 8.9 percent, compared with 14.1 percent of Michigan overall. One-third of Ann Arbor residents are students and another third are employed by the university.
Treasury Bills, Notes and Bonds
While stocks and mutual funds are bound to be a gamble during a depression, default-proof Treasury bills, Treasury notes and Treasury bonds may be a good investment. These are issued by the U.S. government and offer a fixed rate of interest after they mature. Treasury bills are short-term investments and mature after days or weeks. Treasury notes pay interest every six months and mature after two, three, five seven or 10 years. Treasury bonds pay interest every six months and mature after 30 years. During the Great Depression, bonds returned a yield of 6.04 percent and short-term fixed income security bills returned a yield of 3.39 percent.
Some financial experts like Peter Schiff, president of Euro Pacific Capital, a man who predicted the housing bubble would burst in 2005, recommend looking at foreign investments as depression-proof investments. This is because if the United States goes into a depression, the value of foreign currencies unaffected by an American depression will rise in comparison. Schiff recommends looking at bonds and stocks in Asian countries like Japan and Singapore, as well as commodity-producing countries like Australia and Canada.
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