The other day, I was asked what my investment advice for a 65-year old would be? My reply: “Go to the gym and watch your expenses.” To create wealth and/or preserve it for a future generation, all too often do we lose sight of the big picture. Let me explain.

Gold Investment

Most of us invest because we pursue long-term goals, even if the means of achieving them differ greatly. This long-term goal tends to be saving for retirement; for those who can, it might extend to save for a future generation; or, for institutional investors, there might be an infinite investment horizon.

To serve investors, we have a massive industry paid in basis points of assets serviced or commission on products sold. In my humble opinion, our industry is ill equipped to provide advice that falls outside of those parameters. Here are a few of those:

Go to the gym. Seriously. You don’t need to be a wizard able to dissect financial statements to appreciate that your own earnings potential is the one you might have most control over. You have more income options at your disposal if you stay healthy until an old age. While there are limits as to how much we can control our health, it is an aspect of our lives that many of us could easily improve. If you want “diversification” in your portfolio, investing in your own health is something you might want to add to your list. If you manage an endowment, this may not apply, except that sending your board of directors to the gym may not be such a bad idea either.

Watch your expenses. Even more seriously. In an industry offering services on what to do with your hard-earned money, there is too little emphasis on reducing expenses. Businesses and people typically don’t go out of business because of a lack of revenue; they typically go out of business because their expenses are too high relative to their revenue. College students can live off barely any income, but somehow, we all pick up a boatload of recurring expenses as we grow older. The same applies to institutions: for example, donations may lead to new buildings, but those buildings need to be maintained. Most institutions, at least, have formal budget plans.

When an individual goes to a financial planner, they may be asked about their retirement spending habits. I allege that just as many have very little appreciation of what “risk” in a portfolio means, few know how their expenses will evolve once they retire.

May I propose that you analyze your current spending habits to better understand how your spending may evolve? Your current spending discipline may speak volumes about your future spending discipline. To give an example: a good fifteen years ago, I discussed spending habits with two investors: both had a family, both lived in affluent neighborhoods; one of them had about four times the income of the other one. Yet, the person with the more modest income saved more each year than the high earner. And guess what: today, the high earner continues to splurge most of his money while the more modest person has continued to prudently build his retirement nest egg.

There are plenty of models on how much you might be spending in retirement. Adjusting one’s expected future expenses based on a frank assessment of one’s own character might make the exercise more realistic. And the more seriously one takes the exercise of assessing one’s spending habits, the more likely it is that one can actually learn to manage those expenses.

Be a role model for your kids. Financially that is. If you want to save for the next generation, live by example. How can you expect your children to live within their means if you don’t? Financial education is good for everyone, including children. Let’s assume for a moment you are fortunate enough to be able to leave something for the next generation, wouldn’t you want them to also preserve the wealth for the following generation? A good starting point to raise them without feeling entitled may be to teach them about the value of money; and while a lesson on monetary policy wouldn’t hurt, such knowledge doesn’t matter if children do not understand how to keep their expenses in check. And that, in turn, may be difficult if their parents can’t do this.

What does this all mean for your portfolio?
In the context of health, expense management and being a parental role model, can one draw conclusions about what one should invest in? The one takeaway may be that investing is not about bragging rights at cocktail parties. If you can afford it and can afford the risk that comes with an investment to “show off,” I don’t have a problem with anyone investing in a pet project or going along for the ride in a tech startup, be it through private equity or a fashionable stock. Let me just guess that if you are the type to go for the hot stock tip, the fashionable idea, you may also be the type of person who fails the Marshmallow Test; coincidentally, I allege it means your long-term investment returns are more likely to be disappointing. In my view one should treat their portfolio like a serious business.

None of this is rocket science. What makes this worth writing about anyway is that I see so many people not adhere to these simple concepts. I also see many parents struggle to help their children learn about finance and to respect the value of money.

Once those basic concepts are understood, one can start talking about portfolio construction. In our industry, we differentiate between financial planners, asset allocators and portfolio managers. A do-it-yourself investor might be wearing all these hats simultaneously. To make it clear, I have nothing against do-it-yourself investors because they are engaged. I would much rather see a do-it-yourself investor who is engaged than someone who has lots of advisors, but doesn’t listen to them or manage them. Just like any outsourced relationship, hiring an investment professional requires management.

The Merk Hard Currency Fund is a no-load mutual fund that invests in a basket of hard currencies from countries with strong monetary policies assembled to protect against the depreciation of the U.S. dollar relative to other currencies. The Fund may serve as a valuable diversification component as it seeks to protect against a decline in the dollar while potentially mitigating stock market, credit and interest riskswith the ease of investing in a mutual fund. The Fund may be appropriate for you if you are pursuing a long-term goal with a hard currency component to your portfolio; are willing to tolerate the risks associated with investments in foreign currencies; or are looking for a way to potentially mitigate downside risk in or profit from a secular bear market. For more information on the Fund and to download a prospectus, please visit Investors should consider the investment objectives, risks and charges and expenses of the Merk Hard Currency Fund carefully before investing. This and other information is in the prospectus, a copy of which may be obtained by visiting the Fund's website at or calling 866-MERK FUND. Please read the prospectus carefully before you invest. The Fund primarily invests in foreign currencies and as such, changes in currency exchange rates will affect the value of what the Fund owns and the price of the Funds shares. Investing in foreign instruments bears a greater risk than investing in domestic instruments for reasons such as volatility of currency exchange rates and, in some cases, limited geographic focus, political and economic instability, and relatively illiquid markets. The Fund is subject to interest rate risk which is the risk that debt securities in the Funds portfolio will decline in value because of increases in market interest rates. As a non-diversified fund, the Fund will be subject to more investment risk and potential for volatility than a diversified fund because its portfolio may, at times, focus on a limited number of issuers. The Fund may also invest in derivative securities which can be volatile and involve various types and degrees of risk. For a more complete discussion of these and other Fund risks please refer to the Funds prospectus. The views in this article were those of Axel Merk as of the newsletter's publication date and may not reflect his views at any time thereafter. These views and opinions should not be construed as investment advice nor considered as an offer to sell or a solicitation of an offer to buy shares of any securities mentioned herein. Mr. Merk is the founder and president of Merk Investments LLC and is the portfolio manager for the Merk Hard Currency Fund. Foreside Fund Services, LLC, distributor.

Education feed

Editors’ Picks

EUR/USD trims intraday gains, holds on to higher ground

The EUR/USD pair topped at 1.2177 before retreating, as the greenback remains the weakest currency across the FX board. A scarce macroeconomic calendar kept major pairs within limited intraday ranges.


GBP/USD soars to 1.41 after UK elections, US Nonfarm Payrolls

GBP/USD has hit a new three-month high just above 1.41 after the SNP failed to win a majority in Scotland and as the UK is set to extend its reopening. The dollar is still suffering from Friday's weak jobs report.


USD/JPY Forecast: Bears hold the grip

US Treasury yields set the tone for USD/JPY as stocks struggle for direction. The American dollar is the weakest after terrible employment figures. USD/JPY is at risk of falling further and pierce the 108.00 level.


Editors’ Picks

EUR/USD trims intraday gains, holds on to higher ground

The EUR/USD pair topped at 1.2177 before retreating, as the greenback remains the weakest currency across the FX board. A scarce macroeconomic calendar kept major pairs within limited intraday ranges.


GBP/USD soars to 1.41 after UK elections, US Nonfarm Payrolls

GBP/USD has hit a new three-month high just above 1.41 after the SNP failed to win a majority in Scotland and as the UK is set to extend its reopening. The dollar is still suffering from Friday's weak jobs report.


XAU/USD 4-hour support is a hurdle for the bears

The price of gold is trading at $1,836.81 at the time of writing and is up on the day by some 0.30%. The bulls, however, are backing off on what could be profit-taking as the US dollar stabilises within a narrow range on Monday vs a basket of major currencies.  DXY is flat and has stuck to a 90.0420/3390 window.

Gold News

ETH soars above $4,000, as BTC and XRP struggle

Bitcoin price beginning to hint at a complex topping process. Ethereum price shakes off rising wedge pattern to test new Fibonacci extension level.

More Crypto News

UK GDP Preview: Contraction to trigger correction? Sterling set for a reality check

The UK is projected to report a 1.7% contraction in the first quarter.  Optimism about a vaccine-led recovery from the second quarter onward is baked into the price. A reminder of past weakness may trigger a much-needed correction after the big breakout.

Read more


7 Ways to Avoid Forex Scams

The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?

What Are the 10 Fatal Mistakes Traders Make

Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.


Money Management