1. Why Are We Here? – Top Ten Investments to Beat the Crunch!: Invest Your Way to Success even in a Downturn

Chapter 1. Why Are We Here?

We have written this book as a pathway and guide to your financial security. Of course, no book on its own can act as the runway lights for such a complex and dynamic topic as an individual's future financial health.

However, we believe that with the ACTIVE PARTICIPATION of our readers, we can get a good way down the road to safely securing the money part of people's lives.

That's a big boast. But it's a boast grounded in a strong belief that everyone has it within them to become a successful investor. The trick is to step back from the daily mayhem and noise of stock and bond markets and to THINK about the big picture. And that's what we try to do, and to inspire you to do also, in this book.

To think.

To think about where the world is going, where we as individuals are going within it – and to answer a really key question: how on earth am I going to pay for my future once my working years are over?

We as authors speak from personal experiences; we've had plenty of adventures in our investment careers, some good, some bad – and we share the lessons of these with readers. But there's a really important lesson that we try to get across in Top Ten Investments to Beat the Crunch!, and that is:

Investment really isn't that difficult.

The layers of complication that appear to make it so are quite often unnecessary. And of course, the recent financial turmoil adds layers of uncertainty to the decision-making process of every investor. But with the correct focus and application, the current volatility in markets could well provide a cheaply-priced springboard to a really great financial future for our readers.

Sometimes, it appears that the professionals who work in the investment business are that bit smarter, more gifted and better positioned to make money than the general public is. Bitter experience for many people shows that this perceived 'superior skill set' is quite often at the expense of their clients. Look at the bozos who have run venerable banks and investment banks into the ground, as an example.

So, our first task in this book is to strip everything back. Peel the onion down to its centre – to the core of the process of investment. This is a key part of our strategy.

In these pages, we aim to demystify the process of investment. We will put down – in plain language – the ways in which we think you can build up a solid and substantial nest egg for future years.

We go over the exact ways that part-time investors can go about buying and selling the assets that make up their nest egg.

We have written this book – and have really enjoyed doing so – for people who aren't employed by fund managers or by investment banks or the like. This book is firmly for the oft-ignored 'retail' investor – the individual who wisely wants to invest for the future. It is NOT a book for money folk – quite the opposite.

There is nothing wrong with those financial industry guys, but this book is designed to eat a little bit of their lunch. And most of them have (or rather had) too much food on their plates. To misuse an old saying: it's about time the clients got their own yachts.

Of course, that's a little tongue in cheek. We will try and circumvent the 'professionals' where possible, but sometimes they can serve a very useful and indeed necessary purpose. In this book we will guide you as to when you need to use a broker, a financial advisor or a fund manager, and when you can just do it by yourself – and thereby save money.

The most important thing is the long-term goal: to build up as much money as possible for you over the next ten years and beyond, using careful planning and strategic investment thinking. With this in mind, we take you through a series of chapters about the disciplines of saving, of making a plan, and of thinking clearly about future trends.

We know that for many people investment can appear to be a bit like black magic. We know that the terminology used in the investment world can be complicated; and for this and other reasons people quite often give up on investing on their own. They either end up using savings 'products' that perform poorly or are badly designed for their own specific needs – or worse, they end up doing nothing at all. So, for that reason, we use plain language to describe investment essentials. All of us are perfectly capable of creating a portfolio over time that matches our long-term financial needs – partly on our own and partly with the help of professionals.

In this book, which represents the distilled input of 40 cumulative years of investment experience, we aim to give you an 'edge' over the professionals.

We encourage all of you to make your own plans and we try to show you how, with some effort, you can stick to them and get richer than you ever thought possible.

But the word 'effort' is a key one. Without your active participation, dear reader, this book won't do a lot to help you. Unless you read Top Ten Investments and it sparks some new momentum in your own personal financial planning, it will just be a wodge of bound paper on your shelf.

We don't want this book to languish as a 'comfort book', one where people think that somehow, by osmosis or some other, more mystical process, its contents will filter through. They won't.

Although this book is not a 'how to' manual in the sense of a home improvement instruction volume, it does lay out some quite specific steps for you to follow. These include:

  1. Recognition that time is of the essence if our individual financial futures are to be secured.

  2. An understanding that frenetic or 'day' trading in markets of whatever type doesn't work – or at least not often.

  3. An understanding that carefully thought out and long-range investment strategies do work. So it's that long horizon that we should stick to – hence the '10 Years' in our book's title.

  4. Diversification – a key feature of any successful investment strategy which will be heavily emphasized in subsequent pages.

  5. That it is never too late to start – and today is as good as any day to kick off your planning. Quite often people put the vital task of financial planning to one side – and the longer they do so the harder it will be to catch up.

Top Ten Investments to Beat the Crunch! has been written to take you through a dynamic process and achieve three main things:

  1. Confront reality – Are you fully aware of the financial misery that awaits many of us in our future retirements if we don't do some planning and saving NOW? The fact is that many people make false assumptions about who is going to look after them in their old age. Bear in mind, most of us are living longer and will need more care as we get older. We don't mean to scare readers, but putting proverbial heads in the sand won't pay for your retirement years. Nor will, as we detail later, most government or company pension schemes.

  2. Realize action is needed – You need to do something about it NOW and develop your own investment BigIdeas. In our programme, these BigIdeas are the cornerstones of successful financial strategies. We need such strategies to counteract the potential financial crises that will confront anyone who doesn't do something about the dangers of insufficient savings – and of over-reliance on government/company pensions.

  3. Plan and implement change – Set out strategies where you can build your own MoneyFountains – and do so in part by using our tailor-made DiagnosticGrid. These terms might seem a bit facile and gimmicky – but the principles behind them are not. We all need to hit the deep seams of treasure in our investment goals – and we won't do so by slavishly following the status quo.

    That 'treasure' is our MoneyFountain – and the roadmap whereby we deploy our available assets to find the treasure is the DiagnosticGrid. These terms will become a lot more meaningful as the book unfolds, we promise you.

In the book we develop the concept of BigIdeas as a means of constructing the correct 'portfolio' of investments for your individual needs. We map out, as the title implies, our own ten BigIdeas – but we also encourage you to develop your own.

We then describe how BigIdeas can be the source of MoneyFountains – the investments that run and run – and pump out the long-term profits that will sustain our financial futures.

These MoneyFountains are the one or two BigIdeas that will be your own 'home runs'. The MoneyFountains will differentiate your own portfolios from the also-ran mediocre performance of most 'professionally' run portfolios.

If you can build your very own MoneyFountain, then you can wave goodbye to financial worry. That's what this book is designed to help you to do.

Our unique online DiagnosticGrid is available to readers to help them construct a mix of investments suited to their own requirements – matching time of life, economic circumstances and dependants.

The combination of BigIdeas, MoneyFountains and the DiagnosticGrid is one that, correctly used and followed, will give you a formidable advantage – the 'edge' over the professionals.

And actually, our programme is quite simple. Read on – and you'll see what we mean. As we said at the outset, ANYONE, given application and discipline, can build a financial future that's worth having.

But first, let us put this book into its context.

Top Ten Investments to Beat the Crunch! is the follow-up to our 2006 book Wake Up![1] in which we outlined some disturbing economic and political factors confronting our world. These factors were ones that we believed would imperil the comfortable post-war prosperity that most of us in the developed world have enjoyed for so long. Sadly, most of our forecasts in that book – a crash in the US and UK housing markets and deteriorating credit conditions, as well as still-mounting tension in the Middle East – have come true. To an even worse extent than we foretold. We are living through the worst global economic crisis since the Second World War and it's tough out there. That having been said, the message of this revised edition of our book is one of guarded optimism. Things are going to get better – and for investors with guts, now is as good a time as we are ever likely to see to begin investing.

Lest anyone think that our world outlook is exclusively gloomy and that we sit permanently swathed in a cloak of despondency, we need to say right at the start that this book is optimistic in tone. Yes, really.

We believe strongly that the following is true:

  1. Anyone who follows our plan to a reasonable extent will be in a much stronger financial position ten years hence. We haven't written this book to make money, but because we enjoy communicating our thoughts and practical solutions to a wider audience. We really think we can help people with our programme.

  2. Notwithstanding the long-term problems facing the world economy, most notably the pension crisis in the developed world, there are considerable grounds for hope. Diligent saving and a bit of application can and will lead to a strong – and long – financial future for those who make the necessary effort.

  3. Top Ten Investments to Beat the Crunch! will act as a useful foundation to savvy financial planning and investment – BigIdeas are the bedrock of our thinking in this book. We want our readers to develop their own BigIdeas – and we show you how to do so.

  4. We are of the firm view that it is never too late to save and never too late to plan. Look especially carefully at the piece on compound interest in this respect.

  5. We also KNOW that we live in an era of enormous opportunity – a time of unsurpassed technological development, of widening global trade and development. We occupy this world during a period in which the potential for sustained and profitable development has never been better.

  6. We also live in a period of unprecedented challenges; environmental, political and economic. Ironically, it is those very challenges that have provided us with the inspiration for some of our best BigIdeas. As just one example, climate change and its abatement offer huge money-making opportunities, which we detail in some depth later on.

Recapping our earlier point that this is the world's golden age of opportunity – albeit a period likely to be interrupted by cyclical downturns – consider this amazing snippet of history:

It is a fact that until 1820 or thereabouts, the world's economy grew at a glacial pace. It has been estimated that during the 800 or so years from 1000 AD to the onset of the Industrial Revolution, the world's overall economic growth averaged about 0.05 per cent per annum, i.e. virtually no growth. Almost all of the world's development beyond a hand-to-mouth rural existence has occurred since 1820.

The commercialization of steam engines, the exploitation of fossil fuels, the improvement in agricultural techniques and the explosion in population growth – all of these have happened in less than 200 years. The world economy is now, excluding the current period of global recession, growing at about 100 times the rate of its pre-industrial period. In other words, the world's economy is growing such that every 15 years or so it is DOUBLING in real terms. That is truly amazing.

We live in the most fortunate – but also, in many ways, the trickiest – of all periods in mankind's history. Don't let yourself be blindsided by current economic woes – they will pass and the world economy will once again grow.

The best is yet to come.

[1] Wake Up! Survive and Prosper in the Coming Economic Turmoil. Mellon & Chalabi, Capstone Publishing (A Wiley Company), 2005.