How to grow wealthy even in a crisis
The Chinese word for “crisis” is a combination of the words for “danger” and “opportunity.” At least, that’s what motivational speakers like to claim. But it’s largely a Western linguistic myth.
The good news is that it does apply to financial markets. You can use a crisis to grow wealthy.
In fact, financial markets were developed for precisely that purpose… as a form of crisis insurance – specifically what this report is about.
So, before I show you how to grow wealthy during a crisis, let’s explore the very nature of how and why financial markets allow you to do just that.
Financial markets were once about reducing risk
Financial markets came into being to allow people to protect themselves against a crisis.
Olive oil futures during Aristotle’s time helped farmers match supply and demand at a decent price before they incurred the costs of a harvest. It gave them a degree of certainty that they could sell their product at a profit in the future.
Fur trappers in colonial America used financial markets to secure a fair price for their haul before they took to the wilderness to find it. Reducing price risk in this way ensured that hard work and initial investment would pay off. Less animals died needlessly each season.
Wine futures sold a winery’s output before the grapes had even been harvested. This allowed vineyards during the Napoleonic era to transfer the risk of their harvest to wine merchants. Instead of vineyards going broke because of a bad harvest, investors did. But those investors also collected the profits in good years. This provided the certainty and continuity that allowed vineyards to develop the best wine in the world today.
Insurance markets hosted in coffee houses like Lloyd’s protected merchants at the mercy of the sea from financial ruin. The risks were pooled and diversified.
Stock markets in Holland and London allowed people to diversify their wealth and savings across industries and countries to protect them from a shock. People stopped going broke because of a bad year in textiles or mining.
The entire hedge fund industry is based around the idea of reducing risk too. By making bets both ways, overall positions are “hedged” and therefore less risky.
Hedge fund managers have often forgotten this basic principle, or turned their funds into speculative bets that are hedge funds in name only. But if you adhere to the perfectly valid principle of hedging your bets, the benefits are still yours to claim. And financial markets are what make hedging your bets cost effective via diversification.
Making a bet that profits from financial turmoil is usually not about profit in the end. It’s about protection from the losses your other positions experience. It’s a type of insurance or hedge, as described above.
This report is about using financial markets to reduce the risk financial markets pose to you. After all, a great deal of your wealth is invested in those markets. So, although we’ll look into profiting from decline, don’t forget that profit is primarily designed to offset your other losses.
But how?
1. The right sort of diversification
Nobel Laureate Harry Markowitz once said, “Diversification is the only free lunch in finance.” The trouble is that most people completely misunderstand what this means in practice. Especially during a crisis, which is when diversification matters most.
Some people think that a portfolio of many different stocks is diversified. Or that investing across a range of different types of industries is diversification.
This might work during a bull market. But stocks tend to be highly correlated during a crisis. They tend to crash together. That means diversification within the stock market is useless… usually, precisely when you expect it to work.
Besides, a stock market portfolio is hardly diversified. It still leaves all your eggs in one basket – the stock market.
Many people own bonds to offset this. But that’s still isn’t enough.
Let’s take a recent example to show you why.
For decades, stocks and bonds were negatively correlated. That means when one went up, the other went down, and vice versa. This made a portfolio of stocks and bonds “diversified.” And Markowitz built many of his theories on this presumption.
The trouble is that it’s not always true. In 2022, inflation in the UK hit double digits. An unthinkable event only a few years before. Unfortunately, it caused both bonds and stocks to crash at the same time. So the diversification didn’t help at all.
A 60/40 portfolio of US stocks and bonds plunged by a record amount in 2022. Worse than the Great Depression, once you adjust for inflation.
The point is that diversification needs to be done right to work. You need the sort of diversification that works well during a crisis, because that’s when diversification is most important.
What does this mean in practice?
You should hold non-financial assets:
- Gold and silver
- Cryptocurrencies, art, and valuables
- Foreign currency bank accounts
- Real estate
Just owning your own home outright (mortgage free) is a big help here.
Owning shares that are listed overseas is another way to genuinely diversify.
Take a look at your current portfolio? Is it truly diversified?
2. Dry powder for when there’s blood in the streets
Not many family legacies survive more than three generations. Some sort of crisis eventually wipes out their wealth, forcing descendants to start from scratch.
Perhaps the most famous family dynasty is the Rothschilds. Never mind three generations. For over 300 years the Rothschilds have survived countless crises. And profited from many of them.
The mantra that got them through?
“Buy when there’s blood in the streets, even if the blood is your own.”
It’s worked for centuries.
When I first began to invest my own funds, I made a promise to myself: Only buy during a crisis.
The idea was simple. Crises come along often enough. And they allow investors to buy quality stocks on the cheap.
I did just that in April 2025, when US President Donald Trump announced his tariffs. The markets panicked and I flooded my brokerage account with the savings I’d kept on the side for just such an event.
The market didn’t stay down as long as I’d hoped. But my new positions surged in value by 27% in just three months. That’s an exceptional start to new trades.
But, to achieve these sorts of returns, you need to have dry powder. You need to have large savings that you can deploy fast during the crash.
You also need the confidence to do it. The belief that crises both come and go.
Most people don’t expect a crisis to happen. When one does, they don’t expect it to end. So it takes a lot of discipline to both sit on a pile of cash during the good times and plough it into the markets when everyone else is selling.
How do you attain this mentality?
Simple: Read history.
An understanding of the history of financial and economic crises will quickly convince you that they occur often enough to be worth preparing for. And that holding savings for such moments is a very good idea given the payoff they offer.
History will also teach you which assets do best during a crisis…
3 .Gold is the antidote to a crisis
Because gold is tangible and outside the financial system, it’s a great investment to hold during a crisis.
Its most important characteristic is counterparty risk. It doesn’t have any. Meaning that gold held in your own possession is not reliant on anyone else doing their job properly.
Every other major financial asset has counterparty risk. Bonds can be defaulted on. Stocks can crash because management makes mistakes. Banks can go bust. Funds can be gated. And your title to property is dependent on the legal system functioning.
Gold is the antidote to counterparty risk. That is precisely what a crisis comes down to – a spike in counterparty risk.
But there’s one thing to keep in mind. Gold almost always crashes at the start of a crisis. This is because traders can sell gold to raise money in their accounts. It’s like a knee jerk reaction.
You can either own gold at all times and grit your teeth at the onset of a crisis, or treat the initial plunge as a buying opportunity. I do both to help me stay wealthy during a crisis.
4. The investment with the lowest chance of default
Investing in assets that do well during a financial crisis is one way to hedge your risk. But there’s another option. You can buy an investment that is highly predictable and comes with extremely low risk.
This is only possible at the expense of high returns. But during a crisis, returns are not your priority. Preserving your capital is.
If you agree with this, the investment I’m recommending you buy is a UK government bond, known as a gilt.
Now, it might sound absurd to invest in government bonds given the state of government finances and the propensity for central banks to print money. In fact, I think government bonds are a miserable investment in the long term.
But there’s a particular way to invest in government bonds that I think you should follow in anticipation of a crisis. It’s simple – hold bonds set to mature in the next few years to maturity instead of selling them.
For example, if you expect a crisis to last two years, buy bonds that’ll mature then. You’ll get your money back, plus interest, just when you want to invest that money back into the stock market.
Of course bond prices can spike higher during a crisis. So, if you’re right, you might make a substantial capital gain too.
But how do you buy government bonds?
Not via a bond fund or ETF. It won’t mature, so you won’t get your money back on a fixed date.
Instead, your broker likely offers access to gilts already.
Don’t be a goose before Christmas
Merely preparing yourself mentally for the simple fact that crises happen is the most important piece of advice we can give you.
It’s easy to assume that stability will continue. Like a goose that thinks it lives a charmed life on the farm… until Christmas comes around.
History is full of famous people declaring the age of crises is over.
The “war to end all wars” preceded World War II.
The “Great Moderation” preceded 2008.
Promises that inflation would never surge again preceded 2022’s double digit disaster.
One of the world’s best economists declared that stocks had hit a “permanently high plateau” just before the Great Depression.
And the idea of a pandemic in 2020 seemed absurd, until it happened.
The point is, people forget that crises do happen. And that’s what catches them out.
If you remember crises can happen, you’re more likely to use the tools revealed in this report to protect yourself.
Nick Hubble
Editor, The Fleet Street Letter