When it comes to assets, it can be a challenge to really see what is a good asset and what is not. As economic uncertainty continues to dominate the airwaves, everyone wants to know what is going to hold value over time and within a variety of paradigms. In short, they need to get to know the hard truth about hard assets.
Hard assets are the only things you want to be holding when all the chips are down. Hard assets include your basic tangible assets, like cash, treasuries, gold, real estate, and soap. Some intellectual property, like the Beatles songbook or classic movie rights, can also be considered to be hard rather than soft assets.
Soft assets are generally what you don't want to have around in tight times. Soft assets proliferate during booms years, taking the form of paper gains and derivatives. However, many of these complex financial instruments were never based on anything more substantial than the hot air of the salesman who sold them. In tight times, they get shown up for what they really are--worthless!
As you consider the two options and look to the future, it should be clear to you that you need to reduce the number of soft assets in your financial plan. Don't listen to advisors who tell you to stay in stocks and keep playing the market. It's been the decade of no returns over there, and you can do better than that.
Look carefully at each one of your investments, and face up to the facts. Is it underpinned by anything real? Supported by anything that could be touched? Is there anything under there that could be sold in the event of a total collapse?
If the answer is no, it is time to re-examine your motivations for sticking with that investment. Even if you have to take a loss now, it is better to sell it off and put the money is something real than to keep throwing good money after bad. Wise investors know when to call it a day and throw in the towel.
Convert your soft assets into hard assets. When you look at your portfolio again, you will find that you have eliminated a great deal of risk and given yourself a sense of control and security. It may be a bit painful at first to find that not all of your past investments have the ability to ride out the current crisis, but in the long run you will reap the benefits of your decision.
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