If all you want to do is protect yourself from a market downturn, the answer is simple: Put your dough in FDIC-insured accounts. Even if stock prices go into a free fall, your principal and investment earnings will be safe.
But that’s not a real solution for most people. We know that severe market setbacks are inevitable — and we get particularly concerned when stock prices are at or near a peak — but we’re not able to predict their timing. For example, when the Dow dropped 15% in the summer of 2011 amid concerns about S&P’s downgrade of U.S. Treasury debt, many investors feared the slide would continue. In fact, the Dow subsequently rose nearly 70%. So hunkering down in bank savings accounts, CDs and the like could relegate you to subpar inflation-lagging returns for a long time.
Which means that you can’t invest just to avoid a loss. You’ve got to develop a strategy that gives you reasonable protection from short-term setbacks in the financial markets but also offers a shot at investment gains generous enough to grow your nest egg if retirement is still a ways off, or assure your savings will be able to support you the rest of your life, if you’ve already called it a career.
We all use it, it is the common way we acquire services and goods on a daily basis. We trade our time for it. We rely on it to provide for our future, stash it away in belief that it will still have value in the future. It is our currency be it Dollars, Euros, whatever, but it is not as trustworthy as you may think. Look I am by no means a qualified financial adviser or guru in any form, but I am going to explain to the best of my ability; that you should start looking at other forms of investment to secure your financial future.
All national currencies are called fiat currencies. What does this mean? Well Investopedia’s definition of a fiat currency is: