There is an interesting book that discusses a topic that most people might never consider: Where should you invest during a times of war or catastrophic crises? Fools, meet Barton Biggs’ Wealth, War and Wisdom, a book that has always been one of my all-time favourites when it comes to the topic of investing. In it, Biggs looked at different asset classes and how they performed over the course of World War II and beyond. Although war might seem to be a remote concept in this era and especially in a rather peaceful area like Singapore, war…
There is an interesting book that discusses a topic that most people might never consider: Where should you invest during a times of war or catastrophic crises?
Fools, meet Barton Biggs’ Wealth, War and Wisdom, a book that has always been one of my all-time favourites when it comes to the topic of investing. In it, Biggs looked at different asset classes and how they performed over the course of World War II and beyond.
Although war might seem to be a remote concept in this era and especially in a rather peaceful area like Singapore, war is raging in many parts of the world today. And, it’s often going on in countries that were similar to Singapore or our neighbours in terms of development, before war took over and destroyed it all. The on-going tension between Russia, Ukraine, and the United States is a stark reminder that the threat of war cannot be ignored entirely.
Why not cash?
So, one of the first lessons from Biggs is that cash would be a poor asset to hold on to in times of war. If history is any indication, countries that are occupied will get their currencies wiped out and switched to a new one introduced by the conquerors; remember the banana currency we read about in school that Singapore and Malaysia were using during World War II?
Even if your country is the victor, your currency might be deeply hit by inflation and the real value of your cash will be greatly diminished. Furthermore, when war is going on, people might abide less to the law, resulting in a probable rise in cases of theft and robbery. In times like these, having wads of cash on hand might not be the wisest decision.
How about gold then?
The next revelation from Biggs was that gold (yes, that shiny piece of metal that investors flock to times of distress) isn’t the answer either.
There are many who would feel gold might be a good asset to own when disaster strikes. Well, it is, if you are able to hide it well during times of war and do not have to depend on it for survival. That is because, in similar circumstances to cash, gold is prone to being stolen and they are much harder to transport and hide.
In the event that you have to sell your pieces of gold in exchange for some food or necessities, it could prompt others to realize you might have stacks of the shiny metal hiding somewhere. That might make you a target for a potential robbery.
Since the beginning of written history, there has never been a record of a civilized war where citizens not in the thick of battle remain law-abiding. Thus, in times of war, it is best to assume the worst of everyone and put on your survival cap.
Ah… countryside land it is (preferably farm land)
According to Biggs, of all the different assets, one of the safest to own is a piece of land located in the countryside that’s far from the ravages of war. If you have arable land on which you could build a farm, that’s even better. That’s because you would be able to produce food to feed you and your family on that plot of land, providing you with one of the most basic things needed for survival.
An additional advantage for arable land is if the war is over and peace returns, you will likely be able to sell it at a tidy profit in the future.
What about stocks?
The biggest surprise for me in the book was that stocks are not as bad an investment during times of war as one might imagine. As an investor in stocks, you might only face risk of losses if the home country of the stocks you’re invested in ends up being occupied or falls to communism.
Furthermore, having a diversified portfolio might actually give you superior investment performance compared to all other asset classes over the period of the war and thereafter. So, an investment into a diversified market index like the Straits Times Index (SGX: STI) might be a wise idea after all.
Geographical diversification is also important though, and to do so, investors could explore companies that have operations outside of Singapore. There are no shortage of such companies listed here in and shares like Sarine Technology (SGX: U77) and Jardine Cycle & Carriage (SGX: C07) both operate mostly outside of Singapore.
Biggs’ book ends with wise words from Confucius: “Study the past if you would divine the future.” In my view, the words from Confucius are definitely worth a deeper study as life tends to reward those who are prepared for the worst by studying what history has to offer.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.