Where to Store Your Wealth in Times of War?

We often think about investing for our future but one of our key assumptions is that we will continue to live in a peaceful and stable society.

However, as recent world events – such as the conflicts that have happened in Syria and Ukraine – have shown, peace can rapidly fall into turbulence without warning.

Given this, how can we protect our wealth against low probability but highly disastrous events such as war? Let’s take a look at comparisons between a few different asset classes.

Land – “No one can steal it”

Land will always be there; no one can move this asset away and it will always be needed. However, land or properties only have value when the ownership rights are enforced by the government.

In times of war, there might be no government to speak of and so land rights can be easily disregarded by whoever is in power. Land cannot be stolen, but it can be robbed. In a place where the rule of law can no longer be enforced, there is really little value to speak of when it comes to investing in land.

The good old gold

During times of distress, gold can be a relatively good asset class for storing value.

But, it is important for you to keep any gold you have in a safe location that cannot be robbed easily – this creates severe inconvenience. Moreover, carrying a few heavy gold bricks around when you are running for your lives might not be the most practical thing to do.

All that said, it might still be important to keep some gold near your side to act as an emergency currency if needed.

Equities (seriously?)

I don’t think that anyone will really think that equities (a fancy name for shares) would make for a great place to store your wealth during times of war. There’s some truth in the statement.

For example, the stock markets of most countries actually recorded a negative return for the period from 1940 to 1949; this was a period in which World War II took place. Japan, Germany, and Italy, the three nations which “lost” the war, actually saw their stock markets fall by two-thirds to 95% during the same duration.

But interestingly, if we look at the performance of equities in the trio of countries for the whole 20th century, the average annualised real return was still a respectable 4.2%. Other countries which were more stable during the war – such as the U.S.A,  Australia, and Canada – only managed an average annualised real return of 6.5% over the same period.

Foolish Summary

I believe history has shown that equities can be a great store of wealth for investors over the long-term regardless of the situation of the country.

Of course, it is only understandable that most people would be more worried about survival rather than growing their wealth during times of war. But, it is still good to know that your wealth had been in safe hands if you had invested in equities even during the most turbulent of times.

For more investing analyses and important updates about the stock market, sign up to The Motley Fool Singapore's free weekly investing newsletter, Take Stock Singapore. Written by David Kuo, it can help you grow your wealth in the years ahead.

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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 writer Stanley Lim doesn't own shares in any companies mentioned.