US Default: A Doomsday Portfolio

Last Updated Jul 29, 2011 12:09 PM EDT

Talk about a Black Swan event--US default has only occurred five times in the country's history. In 1779 (government unable to redeem the continental currency issued during the Revolutionary War); 1782 (the Colonies defaulted on the debt they took out to pay for the war); 1862 (during the Civil War, the Union failed to redeem dollars for gold at terms stated by the debt contracts); 1934 (amid the Great Depression, FDR defaulted on the debt issued to finance World War I); and in 1979 (bureaucratic snafu resulted in missed interest on some small bills).


So let's admit that while it's not impossible, chances are that a full-on default is unlikely. That said, many of you have asked whether they should do something in their portfolios, "just in case." For most long-term investors, a well-diversified, balanced portfolio should see you through this period, just like it got you through a much scarier time in 2008-2009.

As my pal and MoneyWatch blogger Allan Roth says, "Investing is a long-term proposition and the more we speculate in the short-term, the lower our returns are likely to be...I'm sticking with my balanced portfolio of mostly index funds and CDs."

Yeah, I know...you still want to see my "Doomsday Portfolio". Please check with your advisor or broker to see if this makes sense for you, because it probably doesn't.

Debt Ceiling Doomsday Portfolio More on MoneyWatch:
Image by Flickr User wellington264, CC 2.0
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    Jill Schlesinger, CFP®, is the Editor-at-Large for CBS MoneyWatch. She covers the economy, markets, investing or anything else with a dollar sign. Prior to the launch of MoneyWatch in 2009, Jill was the chief investment officer for an independent investment advisory firm. In her infancy, she was an options trader on the Commodities Exchange of New York.

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