The Focused Investor 2: OthalaFehu on Preparing for the Worst with Precious Metals

This is the second post in Minafi’s The Focused Investor series. This series is a chance to hear investing opinions and takes that may differ from my own, but are core to someone else’s investment strategy.

Each Focused Investor article touches on 3 parts:

• Who’s writing and why are they writing about investing?
• What is one core investing opinion you believe in?
• What advice do you have for someone getting started?

The goal of this series is to see what different investors feel is the most important core opinion about investing and share how they believe someone could get started today.

This week features Othalafehu from Othalafehu.com who writes about his money story, tracks his net worth and his take on personal finance.

If you’re wondering (like I was) here’s where “Othalafehu” comes from:

Othala is the rune for ancestral home, the hearth, and sacred enclosure. Fehu represents our power and possessions gained by own hand, the measure of our earned wealth.

Othalafehu.com

Here’s Othalafehu’s take on adding precious metals to your portfolio to help prepare for the worst:

Preparing for the Worst with Precious Metals

MY name is OthalaFehu. I am a 40something lawyer with a lawyer wife and 2 kids. We are on a FIRE path (5 years out) with our white collar government salaries and our blue collar budgets and lifestyle. I blog anonymously because I am very upfront with our full net worth numbers. I also delve into prepping, paganism, and precious metals.

What is A Core Opinion Investing Opinion or Strategy For You?

I believe in a well rounded family of assets as a bulwark against downturns in the economy, for me, this definitely includes physically holding precious metals.

OthalaFehu

I am playfully paranoid about the end of the world and seriously minded about my fiscal thoroughness. Therefore, I believe that a certain percentage of your net worth should be in precious metals. And by that I mean in PHYSICAL gold and silver. I believe that a well-diversified portfolio includes precious metals and the advantages they hold over fiat currency.

Precious metals are a natural hedge against inflation and tend to move in opposite directions from the stock markets. Much like; stocks, bonds, cash, and real estate, precious metals are yet another basket you should store some of your eggs in.

I do feel that precious metals in not a first line investment, but rather one you should explore after you have a handle on your assets and are looking for ways to squirrel away wealth for a rainy day. I personally keep 2-3% of my net worth in silver and gold and would like to get that number up to 5%.

As a novice tinkerer in precious metals, always start with silver. The common practice to keep gold/silver to a 50:1 ratio. Silver is much cheaper and easier to get started in. I like to use APMEX.com to buy & sell.

Get a few of those coins in your hands and you will be hooked.

Most places will hold your PM’s for you, at a storage fee price. I like to get them shipped directly to me and store them in a safety deposit box at the bank. Coins in hand are worth more than theoretical coins a thousand miles away, especially if you ever actually needed them

Advice For a New Investor

So as far as advice for a new investor, the first thing to do is separate you into one of two camps. If you don’t already have an established emergency fund and well funded retirement vehicles, stop right here. The time in your personal PF journey is not yet ripe for spreading out into PM’s, there are other more important facets of your personal finance that need tending.

If on the other hand, you feel comfortable you have touched on all the major areas and are looking to increase the base foundation of your budding financial empire, then expanding into PM is a sound next step.

Start with Silver. Junk silver is US coins, quarters and dimes, minted before 1964. They contain up to 90% silver. 1 ounce silver dollars are also legal U.S. tender, but you would not use them because the silver in all these coins is worth more than the face value. Bullion is nice for bulk, but does not also double as legal tender. Out of an initial $10,000, I would spend $5,000 in this fashion.

Next Gold. Gold is sold in bullion, but you probably want to stick with coins. 1 ounce coins are nice but also have a practical divisibility problem (they are worth about $1,250). To counter this, you can also buy smaller coins from half dollars all the way down to 1/10th of an ounce coins. $5,000 would get you a nice variety of gold coins.

Have all of this delivered to you rather than paying for someone else to store it far away from you. When you get it, keep it somewhere secure yet ultimately accessible. Now you can sleep a little better at night knowing that you have a little piece of the second oldest source of wealth on mankind’s historical asset list.

Check out OthalaFehu.com for more, or follow @othala_fehu on Twitter to stay up to date.. If you’ve enjoyed The Focused Investor, sign up to my mailing list to get each new article sent to your inbox. 

Do you write about investing and want to contribute to The Focused Investor? I’d love to work with you! Check out The Focused Investor page to see how.