Ben Stein's weekend column in The New York Times (a must-read for me) about the new things to worry about in the U.S. economy got me thinking. His piece was far from apocalyptic, but you don't have to look very hard to find some real gloom-and-doom expectations for our nation's economic future.
I'm far from an end-of-the-world type of guy -- and to be clear, that wasn't Stein's tone; he's more dry than hellfire and brimstone. But I do believe there are evident problems to come that will create headwinds to growth, make capital a little more difficult to access (read: higher interest rates) and create some sort of unpleasantness in entitlement programs.
Rather than debate what will happen, I'd rather expand on Stein's big takeaway: In troubled times, "it is extremely good to have large savings. ... We should all own lots of foreign stocks, lots of diversified exchange-traded funds and index funds and very carefully chosen annuities." I want to get you to start planning what you'd do if the U.S. began to deteriorate economically by some magnitude. While I certainly hope this doesn't happen, I'd rather plan for a rainy day that never comes than not prepare at all.
In particular, I want to focus on "own lots of foreign stocks." A lot of people will tell you that you should own more foreign stocks but won't articulate an effective way to do so. The way to plan for a U.S. downturn is to invest more of your portfolio in foreign assets. You have no doubt read articles that suggest that you, as a U.S.-based investor, should have 15% to 25% of your portfolio in foreign stocks. Put another way, these articles say it's OK to have 75% to 85% of your portfolio in U.S. stocks.
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