Investing Prudently Amid Turmoil

Regardless of how a trust is structured, a trustee has a fiduciary duty to invest the trust assets. With all the chaos in the markets these days (look here for the gloom), a trustee may be inclined to look at their mattress as the safest investment vehicle. As any student of the markets knows, however, there are always opportunities amid the crises.

Take stocks, for example. While the Dow has dropped about 10% from its all-time high of 14,279.96 on October 11, 2007, it is only down 2.4% from where it was a year ago. And the U.S. isn't the only place to invest money. European stocks have been pounded over the past year, but the markets in South America, South Africa, Hong Kong, Indonesia and India have all performed very well (this doesn't however take into consideration any erosion of returns cause by the declining dollar, which is another float in the parade of horribles).

Commodities, which include oil, corn and gold, are almost universally way up. It's impossible to know when anything is at the top of its price, but I think it is safe to say that the current upward price pressure cannot last much longer. Once the prices get too high, demand will fall off, and the prices will begin to drop. There is already some indication that demand for gasoline, which is comfortably over $4.00 a gallon here in California and is the only reason anyone cares about the price of oil, is beginning to fall. Commodities such as corn, soy and other food crops will probably be the object of government intervention at some point if their prices don't level off, and there is some amount of speculation built into their price because of their potential as an alternative to oil as a fuel source.

What is a trustee to do? Don't panic, you are a trustee after all. Look to the professionals. Ask your financial advisor for help. If you don't have one, get one. Make sure the trust allows you to hire an advisor and to pay them out of the proceeds of the trust. It's part of your job as a trustee.

I could go on about how and where to look for opportunities. They are out there. If you are a fiduciary, it is important to surround yourself with a trusted financial advisor who can help navigate these waters, which seem filled with sharks, icebergs, alligators, and what have you.

The mattress is never as good as it looks, anyway.