Introduction

Paper money eventually returns to its intrinsic value—zero.

—Voltaire

I've read a lot of trading, investing, and finance books over the years. One thing that really annoys me is reading the first third of the book and not learning anything new. Or realizing that the author has a completely different philosophy than I do on the subject, so I can't really get any benefit from the book. So I want to be sure with this book that you know exactly what you're getting before you spend time and money to understand my message.

For this reason it's easier to describe who this book is for, from a personal finance point of view, and let you decide whether you fit the profile. Then I'll briefly describe what the book is designed to help you with.

First, and most important, to benefit from the advice and techniques in this book, you need to be financially stable. I call this “financial fitness,” and Chapter 1 deals with exactly what this means. Basically, you should have monthly net income that is greater than monthly fixed expenses (i.e., you should be cash flow positive). You also must have assets that are worth more than current liabilities (positive net worth).

If you're not financially fit (or close to it), then the three-step method this book describes will not be of much use to you. In this case I suggest you read some of the books on personal finances listed in Appendix A of this book, or check out the “Protect your Wealth from Inflation” page on my web site, at http://pmkingtrading.com. Only return to this book when you have achieved financial fitness.

Assuming that you do fit the description of financial fitness, then I'd like to explain what the rest of the book contains so you realize just how much you need this book! The book's title has three main words in it that should be big clues to what the book is about.

The words are:

• Protect
• Wealth
• Inflation

Let's deal with them in order.

Protect

Protection is not about generating a massive return really quickly. It's about the other side of the coin: preserving the assets that you already have and making sure you can more easily weather any financial storms that inevitably come along. For this reason, the first step in this book is about how to manage an emergency fund that can keep you afloat financially if you lose your primary income, have a large uninsured expense to deal with, or experience any other financial emergency. The important idea is that you need to manage your emergency fund in a way that will not be adversely affected by interest rates or other factors that are out of your control, like government monetary and fiscal policy.

A key concept in this book is that risk and return go hand in hand. It's very important that you think about the risk side of the equation first, and then make sure you're getting paid for that risk with a decent return. However, risk can be hidden in some unusual places. For example, if you put cash into a savings account paying an interest rate that is less than the current rate of inflation, then even though the dollar value of the account may be insured so it's “risk-free,” you're still losing purchasing power every single day. Eventually, the money in the account that could, say, purchase six months worth of products and services when you put the cash in there, may only buy six weeks worth when you need it. How is that risk-free?

Chapter 2 explains the problem of inflation in detail. This is then followed up by Chapter 3, which outlines step one of my three-step method: how to protect the purchasing power of your emergency fund so it's still worth something when you need it.

Wealth

The second important word in the title is wealth, which is what you want to protect. Obviously, if you don't have any wealth to protect because your net worth (current assets minus current liabilities) is negative, then this book is not for you. If you do have a positive personal balance sheet because your monthly income is greater than your monthly expenses, then it's a good idea to have a plan for protecting and increasing the value of your working capital (funds that are not earmarked for emergencies but are not being used for investments).

Chapter 4 deals with how to effectively manage your savings and working capital regardless what the prevailing interest-rate and inflation environments are.

Once you are managing your emergency fund and working capital effectively, then further surplus income and assets can be put to use generating a satisfactory risk-adjusted return in investment accounts. Chapter 5 deals with how to manage investment accounts effectively by controlling risk, and then getting paid a decent return for the risk you are taking. Here's a small hint: traditional investment management techniques do not do this effectively at all. As you will learn, you must change your approach to avoid future disappointment. Buy-and-hold, dollar cost averaging, and other traditional financial management techniques just don't work very well. In this section of the book I'll describe in detail how to manage your investment account in a straightforward but sophisticated way to maximize your risk-adjusted return, and I'll also demonstrate how this approach provides a significantly better result than traditional portfolio management methods.

Inflation

Inflation is the last word in the title and is the main focus of the book. What does your wealth need protection from? Price inflation. As I mentioned earlier in this Introduction, Chapter 2 describes the problem of inflation in detail, but in terms that anyone can understand. Mitigating the effects of inflation forms the backdrop for each of the subsequent chapters.

I'm not formally trained in economics (thankfully) and I don't subscribe to any particular economic theory or policy. But I do have a great deal of experience helping people protect their portfolios from the losses that might otherwise occur when they stand by and watch inflation eat away at cash and investments. I just want everyone to understand why inflation is inevitable, what practical effect this has on your wealth, and how to do something about it so it doesn't end up significantly hurting your personal finances.

Chapter 6 is a summary of everything covered in the book and can be used to jog your memory as you continue to implement the three-step plan—a plan that helps you to effectively manage your money in three key areas:

• Emergency fund
• Savings
• Investments

In Summary

To sum up, this book is for individuals or families that are financially fit, have some wealth to protect, and need to effectively manage an emergency fund, savings and working capital, and investment accounts. The book describes a comprehensive but easy-to-understand step-by-step process you can follow to maximize your chances of success and minimize risk, and also help protect your assets from being ravaged by price inflation.

I wish you all success with your endeavors to protect your wealth from the ravages of inflation with the help of this book. Please send questions and comments to me via the contact page on http://pmkingtrading.com.