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Invest in SWAG and See Your Stocks Soar!

12 August 2012

There’s no getting around it; it’s not a great time for the stock market right now. Bonds are not the refuge they once were and investors just don’t feel as great about equities as they once did. But that doesn’t mean that investors are left out in the cold. There’s still hope – and it comes in the form of some pretty sexy SWAG.

SWAG stands for Silver, Wine, Art, and Gold; and these are the four stocks that Joe Roseman says are the smartest investments on the Toronto Stock Exchange right now, especially if world conditions and governments continue to act in ways that hurt investors, such as printing exorbitant amounts of extra money and giving huge bailouts to major corporations. These aren’t things that happened here in Canada during the latest recession; but they did occur in the United States. And every savvy investor knows that what happens in the States will only take time to affect us here at home.

Roseman’s argument is that these things are going to continue to occur, across the border and possibly even here in Canada. However SWAGs can also act like currency; and these currencies cannot be created out of whole cloth. This is kind of the magic of these investments. While they are still considered to be currency (or at least are able to act like it,) they are protected from the dangers that can befall traditional currency. War, recession, monetary policy – none of it affects the value of SWAGs, and that’s what makes them so great, according to Roseman.

Now that we’ve heard the arguments, let’s take a look at each SWAG individually, and investing in them.

Gold is the granddaddy of investing. There’s really no question about it. It’s gone up over 400 per cent in the past ten years and has become the stock of choice among institutional investors. It’s cheap to invest in, meaning there aren’t a lot of costs attached, and you’ll be protected from all those elements that other investments are, such as money-printing.

Silver has always done almost as good as gold; but the past ten years have been even kinder to this hard currency – it’s up almost 500 per cent.

A look at the chart below shows why gold and silver always have been, and will continue to be (at least for the next couple of decades) very smart investments that should be included in your portfolio.

Next there are the arts and wine. These stocks, while still profitable and relatively safe vehicles, do carry more risks than either silver or gold.

Art of any category is not something that investors often think of when considering where to put their money; but this too is a group that has done very over the past decade. And it’s one that Roseman touts most highly. It’s wise to know that investing in art is something that’s usually only done by the very wealthy, as shares don’t come cheap and the carrying costs can be high. Of course you also have to make sure that if you’re investing in Picassos, they’re actual Picassos.

Another odd one, but not nearly as risky or as awkward as dealing in art can be. Investment wines, such as the Chateau Lafitte, which is an extremely popular wine in China, have performed extremely well over the past ten years. But here too, there is risk. The amount of “Lafitte” that was consumed in China was ten times what the production was – showing that fraud can be rampant in this group, too.

As you can see from the chart below, Corby wine can be a great investment for Canadians. It’s brewed right here in Ontario and has both done well, and is forecasted to do well for at least the next year.

So how much should you be investing in SWAG? Roseman says that they should combine to make up about 20 per cent of your portfolio; but it may not be prudent to put this much aside all at once. It’s important to understand the costs that these funds carry, and the fraud that is the constant cloud hanging over at least two of them in art and wine. Of course, there’s always the chance just like with any stock that shares could plummet after recession hits, or other economic factors make their own impact.

SWAGs can be good; and they may have even been the highest performers in the past ten years. But due diligence and working with an experienced financial adviser that will save you in fees and provide guidance along the way are a must with any stock. SWAGs might be the smart move for you. But that doesn’t mean they’re fail-proof.

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