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The latest issue of Smart Money landed in my mailbox on Saturday. Inside was this doozy of a question:
I’m confident in my investments, but one thing could throw them off: a nuclear attack on a major U.S. city. Can you recommend a portfolio that would hold up?
My first reaction was laughter, but that’s not fair to the questioner. It’s probably a real concern to some people. Stephanie AuWerter, the Ask SmartMoney columnist, does a good job of responding:
Let’s face it: The likelihood of a nuclear attack is exceedingly low, and hedging for such a possibility could leave your portfolio in pretty bad shape. Sure, you could load up on U.S. Treasurys or gold coins, but chances are your investments need a fair amount of growth to meet your goals.
AuWerter notes that following 9/11, the markets dropped sharply, only to return to their previous levels within two months. She recommends that the worried investor save six months of living expenses in an emergency fund — or even more if the person is really worried — but advises that investment portfolios be left untouched.
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June 12th, 2006 at 10:09 pm
If you are worried about any nuclear attack or any war a portion of your portfolio should be apportioned to “defensives” such as banks and other consumer necessity companies.
You may also want to consider “blue chip” large cap companies that have consistently returned a dividend over “bad times” such as the early 1990’s and tech crash.
Remember any large falls in the market can also be viewed as an opportunity to invest (with caution).