The famous French philosopher Blaise Pascal defended his belief in God in the following way:

If God exists, the “Believer” wins and the “Atheist” loses.

If God does not exist, the Believer loses and the Atheist wins.

Is this a simple coin toss, heads you win, tails you lose? Not even close.

The outcomes of the two scenarios are vastly different.

If God does not exist, all the believer loses is some time spent listening to sermons every week and possibly some form of debauchery during his time on this planet.

Yet if the Atheist loses, he or she spends eternity in misery.

So how does this apply to investing?

Here’s an example. You have a diversified portfolio with a substantial allocation in gold.

You know there are two things that can ruin your retirement. Inflation or a severe bear market along the lines of a 90 percent decline, like in the 1930s.

Your neighbor (the Atheist) believes the only way to invest is to have an all-equity portfolio. His broker agrees it’s the only way to hit it big and "fulfill his dreams" in retirement.

Sounds like every brokerage firm’s TV commercial, doesn’t it?

Once again, the possible outcomes are completely different.

If inflation stays in check and the stock market goes higher, you both live comfortably in your retirements.

But, if stocks crash or inflation wipes out all buying power, you still have gold and get to enjoy your retirement.

Yet your neighbor, with no gold, loses 90 percent of his nest egg and finds himself living the rest of his life in poverty.

Thus, the rational investor builds a diversified portfolio which certainly includes a large allocation of gold.

Never forget Pascal’s Wager or you may find yourself spending your retirement years in the poor house.