big picture — financial protections (insurance, diversification, current income…) are important-partially-effective as protections of family livelihood. More important protections are non-financial

• 1A) health and healthcare system,
• 1B) strong marriage and family,
• 1C) resilient career longevity
• 1D) Good kids working on reasonable jobs would be a strong protection. This factor is largely within my influence as a parent.
• 1F) strength of Singapore and U.S. , my two choices.

Black swan crash mostly affect stock market and property market. This scenario is different from long-term devaluations discussed in another blogpost

Many stock market crashes saw all the experts proven wrong, but each time, a few people seemed to be prepared for the crash, because … BlackSwan by definition is obvious in hindsight.

I feel every serious student has this same homework — study each crash and draw his/her own conclusions. I haven’t done my homework. I will simply point out that in a stock market crash, if we are cautious to avoid buying at the peak (assuming our judgement is right, though no one can predict.) then most investments should not suffer many years (specifics? no need) of draw-down. Suppose we see the longest draw-down is 8 years. We are right to assume the most likely length of the next draw-down is that long. But statistically we are unlikely to suffer exactly that draw-down, since we are unlikely to invest 100% at the very peak.

I feel developed market eq and bonds both exhibit a long term trend. Central banks will handle any liquidity crunch, so those are likely short-lived crashes.

— 3 CPF-life
— 4) diversification (at low correlation) could help, even tough all assets decline together.
Reality — Some assets recover faster than others. Some fall less than others. By diversifying, I have a reasonable chance of capturing some quick recovery, perhaps on a small position.
— 5) income stocks are safer among stocks, assuming most of them continue to pay dividends.
— 6) Gold is the strongest “currency” and a good hedge for equity market crashes and some (but not all) political upheavals, but you must be prepared to hold it for decades.
— 6b) USD is safer, so is SGD to a lesser extent. Flight to safety.

— 7) gov bonds are safe, partly because
* Gov have the (not unlimited) power to print money
* flight to quality
— 7b) I believe Investment-Grade bonds are safe, because government would inject liquidity to help the “normal” corporations survive and service their debt.

— 8) rental yield is more weather proof than the promise of windfall appreciation.

Suppose my high-yield rental property pays out NetRY 5% vs 2% for a high-end residential. In a down turn, valuation could drop by half. My rental income provides 4 cushion compared to the high-end

1. in good times or bad times, my rental property is more likely to be rented whereas the high-end is less more likely to be vacant, because my property was bought for the sole purpose of rental.
2. If both are rented out during the down turn, then my rental property is likely to generate higher rental yield just as before the down turn
3. higher rental yield is an attractive feature during a down turn, as the prospective owners assess the positive cashflow. This is similar to income stock vs growth stock. Therefore, the valuation drop is less severe than the high-end residential.
4. suppose we are forced to sell at a loss during the down turn, my cumulative rental income — hitherto received — would offset my losses.
5. (Not a cushion) The promise of windfall would be very hard to keep after a huge draw down. In contrast, the rental yield was already realized over the preceding years.