It was on an evening laced with hope at the dawn of a new decade when the first frantic news reports emerged. On New Year’s Eve 2019, as folk around the world gathered together to celebrate, a deadly virus was on the attack.
Most people remained blissfully unaware of the impending calamity and how quickly their lives would unravel. By mid-April 2020 the coronavirus pandemic had reached almost every country in the world.
Indeed, most countries were caught off guard by the first major pandemic of the 21st century. But why? As pandemics have historically been prevalent in human societies, many lessons could have been learned. (see Figure 1).
But in the modern era, huge medical advances have perhaps convinced us of our invincibility. This might explain the complacency and lack of preparedness that enabled the coronavirus to spread so fast and hit so hard.
Figure 1. An outline of significant pandemics in human history; more than ⅓ of them happened after 2008
Not everyone was caught blindsided by the coronavirus outbreak. Back in 2015, Bill Gates publicly warned of the danger of a human respiratory pandemic transmitted via aerosol droplets. Sadly, his warning went largely unnoticed. So today, as COVID-19 ravages through our societies, we must surely accept that we ignored the warning bells and were woefully unprepared, but also that pandemics are an entirely predictable part of life rather than an extremely rare and unlikely event.
With the widespread misuse of antibiotics, accelerating climate change and rapid urbanisation, pandemics of the future will likely become more frequent and severe. We as a species need to be far more prepared for this continuous onslaught.
History has also taught us that those who prepare well before pandemics (or any crisis for that matter) tend to cope better and bounce back faster than the rest. For example, those wealthy preppers who escaped New York to their rural retreats before it became the Ground Zero of COVID-19, are unlikely to have been infected and will thus emerge in good health, ready to tackle the challenges ahead.
Equally, people who hold investments in resilient assets will not see their net worth or income adversely affected by the shutdown and stay financially sound.
What does crises teach us?
Be properly prepared. It is as simple as that.
Being prepared (physically, financially, mentally) before a crisis means that you will act decisively and outlast others. In a world of dwindling resources, being prepared will expand your influence and power, thus maximising the chance of you emerging as a winner.
The way to be financially prepared is by owning bulletproof assets that can withstand crises and thrive in both favourable and adverse market conditions.
How to identify bulletproof assets?
Bulletproof assets come in a broad range of flavours yet all share some defining characteristics. Finding them can be a long and uncertain process, especially to the uninitiated. Consequently, there is plenty of difficult homework to be done before commencing a search.
1. Differentiate between investment and speculation
Whilst an entire volume or more could be written about the difference between investment and speculation, it is sufficient to say that any remotely rational human should choose the former over the latter. Investment, made with a cool head after a rigorous analysis, should largely eliminate the risk of permanent capital loss. Whereas speculation has a high risk of such loss.
Essentially, investors must understand the underlying potential of any given proposition before releasing cash. Basic stuff like “How does the company make money?”, or “What is on the balance sheet?”, are critical questions. Successful investors remain cynical and factual during the due diligence phase, before committing.
A get-rich-slowly mentality, where you, for example, earn a 10% return year after year is far more rewarding financially and psychologically than committing to a seemingly clever hedge fund that promises you 100% gain but could be a black hole for all your money within a year.