Investing When You Don’t Have Much to Invest

Today, another reader mailbag.

This Ask El Jefe question comes from “M” (I’ll leave her name out), and it’s a dandy of a question:

I’ve been enjoying IL and reading your articles/emails. I can’t help but think that you are speaking to your contemporaries of all this wealth you have and where to put such wealth to protect and to grow. What about those like myself that literally have little accumulated for retirement and want to protect against what’s ahead?

How could someone like me keep up and do the same as you? I’d love nothing more than to have financial stability during these unstable times. Living paycheck to paycheck is difficult and worrying what this president is doing to us keeps me up at night. I hope that in your next writings you can help the little guy, not just those who have wealth, but those of us that don’t have much. Thank you for all you do and keep writing!

Like I said, that’s a dandy letter. Thanks, M.

Her perception is largely accurate: I do write my missives with a certain assumption that readers probably have some wealth that they can put to work in various financial markets. I don’t really have an idea on what I think that number would be, but it’s certainly not millions, I can say that.

I’m assuming a couple hundred grand, maybe?

Which, I totally understand, is a lotto-ticket jackpot to someone living paycheck to paycheck.

But even Americans who are struggling financially deserve solid financial advice to, hopefully, help them preserve and grow their wealth as retirement sneaks up on them… or as they deal with the expenses of living through retirement right now.

My grandparents, who raised me—their largest asset was a $20,000 certificate of deposit earning 15% annually across the entirety of the ’80s.

So, M, here are my thoughts; and note that when I first started writing investment columns for the Wall Street Journal too many decades ago now, I did so as if I was writing to tell my grandmother what she should do with her money… a way for me to make the topic understandable and, to a certain extent, safe.

Now, please note: This is not personalized investing advice. I don’t know M’s specific situation; everyone’s circumstances are different, and only you know what risks you’re willing to take on, etc. This is just my general view in answer to M’s question.

Of course, my first suggestion is going to sound entirely unsafe and risky. But hear me out: Put a tiny bit of money into a bitcoin ETF, such as the iShares Bitcoin Trust ETF (symbol: IBIT).

But invest nothing more than 5% of the money you have saved.

Yes, bitcoin is crazy volatile, the exact opposite of risk-free. But 5% is not a sum of money that will destroy your future if it goes to zero. Moreover, bitcoin is not going to zero. Bitcoin is going to see highs most people cannot imagine.

So, a 5% stake in bitcoin is going to give you an astronomically asymmetrical return relative to the risk. (Financial planners will squawk and wail about that recommendation, but they are simply wrong in this instance. Most don’t understand crypto and, so, they can’t come up with a good reason why their clients should own it. I will point you to my many bitcoin dispatches, for example, here, here, and here, if you care to understand why.)

I would also tell you to focus on putting to work whatever money you can afford into a Swiss franc ETF (Invesco CurrencyShares Swiss Franc ETF, FXF), and a gold ETF that owns physical metal and does not lend and borrow against that metal (Sprott Physical Gold Trust, PHYS).

Neither of those is sexy. But they’re both going to protect you against a dollar that is in perpetual decline. Meaning that as the dollar declines—driving your future cost-of-living higher—these two assets will be worth much more in dollar terms. So you will have successfully battled inflation.

Finally, I would suggest owning some relatively safe “preferred stocks.”

These are like traditional shares of stock, but they have bond-like characteristics. As such, they’re not terribly volatile. But they kick off really nice dividend yields of 7% to 10% or so. (Stay away from anything more than about 10%; too much risk there.)

I cannot pinpoint exact shares to own in this dispatch, but I’ll tell you to look at energy pipeline companies and big public utilities. There’s a good amount of relative safety there.

You can get started in any or all of these investments with any amount you can afford to put aside.

You’ll notice I am not recommending any kind of bonds. That’s because the US dollar is losing favor, and demand for US Treasuries is worrisome at the moment as foreign investors reappraise their desire to put money to work in US debt, because of growing fears about fiscal prudence and whether America will honor commitments to bondholders.

So, I’d just as soon avoid Treasuries because they’re likely to perform poorly.

And with all of that, you’re good to go.