How the Current Economic Climate is Putting Pressure on Investments

Posted at May 1, 2023 Posted In Helium, Investing, Taxes

Between the recent banking crisis … ongoing recessionary patterns … and feeling of anxiety that is looming over the U.S. economy … it can be difficult to navigate through your investments.

In this newsletter, I’d like to share some insights I’ve had over these issues that might guide you in your own investment decisions.

Silicon Valley Bank’s collapse
 highlighted the risk that many banks have in their investment portfolios — which, despite FDIC insurance, is not entirely risk-free. Due to high inflation, these banks had assets on their books that lost a lot of their value.

The key point to remember about banks is that your bank deposit is a liability for the bank. When the bank invests in assets that lose money and these losses continue for an extended period of time or happen significantly very quickly, eventually the assets do not have the value to back up the depositors balances, or liabilities of the bank, and the bank cannot pay back its liabilities, i.e., your bank deposits.

Relying solely on the traditional banking system to store and manage your capital — as well as being deeply invested in Wall Street — is becoming extremely risky. Trusting banks to properly manage their assets to support their liabilities, i.e. your bank deposits, is risky.

It’s well-established that the best exercise in the control of your wealth lies in the diversification of assets … but how do we assess which assets can withstand the unpredictable downsides and repercussions of high inflation, increased interest rates, and recessionary pressure?


What Should our Criteria be for Investing During this Economic Season?

I considered all these outstanding factors (the macros) while setting out my financial plan, goals for the year, and my personal standing (the micro).

Your criteria is influenced by the following factors — and as I discuss, you’ll see that these factors are also interdependent with one another:

  1. Your age, particularly where you are at in your life and career …
  2. Your current and future financial goals versus the economic cycle …
  3. And most importantly, your own investment philosophy.

Your Age of Retirement

I’ve previously shared how I began seriously preparing for retirement only 10 or so years ago (virtually from zero) and the importance of Passively Building Your Retirement Fund.

To recap, I used a financial strategy called ‘Infinite Banking’ which is essentially, purchasing dividend-paying whole life policies with your ordinary income, to invest in assets that build passive retirement income.

These policies can be used as collateral for loans so that the individual can “effectively” take money out of the policy as a loan more quickly. You can also secure cash in hand faster and usually at lower interest rates than those available from traditional lenders.

This core strategy and other real assets like gold/silver is what makes up 20% of my portfolio which I’m calling the ‘Family Bank’. I even throw Bitcoin in there — even though it’s very volatile — because it has all the characteristics of a long-term currency.

This Family Bank is the foundation of my investment philosophy. I seek to generate enough cash flow to live my desired lifestyle, even when I reach my age of retirement from my W-2 job.

Now, the reason I call it the Family Bank falls into my second criteria…


Your Financial Goals vs. the Current Economy

I seek out investments that hold real value over the long run because I want to pass down generational wealth. I’m concerned with acquiring assets that my loved ones and next of kin can benefit from.

I have developed an investing model using diversification among certain real assets. By establishing the Family Bank, I ensure that my portfolio will survive and thrive over 100 years regardless of what happens in the world.

None of the assets in this Family Bank provide cash flow necessarily, but you can borrow against them as collateral to get cash. These are stores of value that you can collateralize for loans, much like a traditional bank would.

But unlike a bank, these assets do not operate on a fractional reserve system.

For those of you just starting in your investment journey, your concerns may differ. If you were in your 20s or 30s, I might tell you that your stake in these kinds of assets only needs to be at 10% of your portfolio.

Your focus would be on cash-flowing, active streams of income — whether that’s your high-earning W-2 job or a lucrative business. Whatever your bread and butter may be.

This would especially need to be the case if economic conditions don’t currently allow for passive income in abundance. It would probably not be wise to risk quitting your “day job” if the market you want to pursue is down.

Again, that is your personal choice … much like my last point: deciding on and sticking to your investment philosophy.


What’s Your Investment Philosophy?

There are those who prefer “playing” in the stock market … and those who trade cryptocurrency … What they do and how successful they are in their ventures depends on their skill, knowledge, and risk tolerance.

If you’ve been following MRAP for awhile, you’d know that my investment philosophy is grounded in stable, real assets such as commodities, precious metals, and real estate.

And as a quick disclaimer … Everything I share is based on my personal criteria and understanding so please practice your own due diligence — and consult with your financial advisor!

My real asset portfolio consists of Real Estate and commodity-type investments in Oil & Gas, such as Carbon Capture and Helium. These are also cash-flowing operating businesses, even if my stake is materially passive.


That being said, what do you think your investment criteria is?

At Match Real Asset Partners, we help busy professionals like you find investment solutions that can reduce your tax burden, protect your wealth, and produce passive-cash flow.

Book a call with me to discuss your financial goals and see how MRAP can help you achieve financial freedom.

I would love to know your thoughts on the insights I’ve shared!

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