I was reading an article about the motivation and emotion behind investment decisions in treasures or non-financial market places to put money. Of course, we work in precious metals and fine art so my interest was piqued. There are some people that are afraid that paper money which is called “fiat currency” may collapse and the stock market and related investments will be rendered insolvent. Physical Gold & Silver coins are a store of value which was considered “money” more than a century ago. When the stock teeter-totter side goes down, the Gold teeter-totter side goes up…so we can put faith in having treasure to protect our money. The other side of the coin (no pun intended) is that people who buy treasures may believe the value will go up into the future and this is a prime motivator. Fear and Greed are two most common motivators. Ask yourself a question. Why would I put my money into treasure? I encourage you to read the article by Barclays. here is the link. https://wealth.barclays.com/en_gb/home/research/research-centre/wealth-insights/volume-15/Emotional-versus-financial-motivations.html
I will add another element that drives investment. Logic or belief. For example, let’s pretend you are standing in the bottom of a deep hole. The hole is deeper that you can climb out of by yourself. If someone standing above the hole offers you a ladder or rope you become confident that you can climb out of the hole. Why is that? Our mind is trained to believe that a future action will work based on previous experience. Similar to the hole, as investors we believe that if we have experienced a situation before under certain economic circumstances wouldn’t it be plausible to experience them again if the economic circumstances are similar? Take a look at this graph. I borrowed this image from Banyan Hill to illustrate a point they make in an article that talks about the correlation between federal interest rates, inflated asset values or “bubbles” and lack of correlation between them and rise in personal income. We have experienced similar “bubbles” before within the last 20 years! In fact, we all probably remember losing money in the stock market when Dot com tech stocks crashed in the year 2000 and then when the housing market crashed in 2008. So, now today the U.S. has $20 Trillion in debt and the price-to-earnings ratio is in the high 30’s as it was when the stock market crashed before. Read the article for more facts and compare history to today. https://banyanhill.com/tech-bubble-housing-bubble/#readmore
NOW, back to the “hole” example. If a man standing above the hole offered you a ladder or a rope to climb out of the hole you would likely take it. Similarly, if we suggested to you to buy treasures before another potential stock market crashed to protect or diversify your money would you do it? Compare the circumstances in previous years to today and make the move! Call us at 715-318-4653.