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« I don’t have any gold | Main | Your Money Back If Gold Doesn’t Trade Above $1500 in 2011 »
Tuesday
Jan112011

New Year’s Resolutions for Your Gold Portfolio

By Jeff Clark, BIG GOLD


It's exciting to think we may be nearing a mania in gold. The price will likely double or more within a 12-month period not too far in the future (it rose 125.7% in 1979). And yet, amazingly, there will be investors who lose money in that run.

How? Chasing returns. Jumping in and out of positions. Too emotional. Underinvested. Lack of diversification. Inappropriate expectations. Ironically, all of these are within the control of the investor.

While you likely have some exposure to precious metals if you're reading this, is your portfolio arranged in the most effective ways to take full advantage of the ongoing bull market? In my opinion, there is a material difference between those who will make enough money to vacation in Malibu vs. those who could choose Milan.

And those differences mostly come down to mindset. With the assumption that gold has years to go before it peaks, here are a few New Year's resolutions to consider for your precious metals portfolio...

Resolution #1: I will buy gold until it doesn't matter how much money Ben Bernanke prints.

Even if the statements from your bank or stockbroker show an increase every month, inflation is eating away at your capital. To insure the real value your assets, include a meaningful amount of gold and silver. How much? When the next announcement of quantitative easing doesn't make you flinch, you're getting close.

Yes, the government says inflation is low, but the full effects of all the money the Fed has printed have not yet hit the system. They will. As the saying goes, it wasn't raining when Noah built the ark. 

Resolution #2: I will purchase gold coins for personal storage. 

Even if you buy precious metal ETFs, pool accounts, or other "paper" forms of gold, keep some coins under your direct physical control, because sometime in the next few years you may need them to buy Cheerios or gasoline or fix your roof or have your appendix removed. I suggest Eagles, Maple Leafs, Philharmonics, Krugerrands, and Buffalos because they are the most widely recognized and hence easier to trade than even small gold bars. You don't want a potential buyer questioning the authenticity of your gold if you need quick cash. 

How much should you put into coins? There's no magic number, but don't stop until you have at least three months of living expenses stored away. And then continue adding as your assets increase. If you don't have any, start by buying at least one. Today. 

Resolution #3: I will not get emotional about gold's volatility.

News flash: gold will have a correction in 2011, probably more than one, and maybe a big one. Consider these facts: Gold's average decline in the current bull market is 12.8%; there have been at least two corrections greater than 5% every year since 2001; and we've had two 27.7% sell-offs just since 2006. How you react to the next pullback could mean the difference between taking a loss and doubling your gain. Will you panic and sell, or hold tight and perhaps even buy more?

No one adds to his success by fretting about daily ups and downs. This leads to too much trading and the self-defeating costs of commissions and bid-ask spreads. Watch your investments, of course, but with some emotional distance. 

I believe we're in the middle of a long-term trend for precious metals. So give it time to deliver the profits you're seeking. Your precious metal investments are like a cake in the oven; you'll ruin them if you keep opening the door.

Resolution #4: I will learn to buy on the dips and average down.

Are you happy when gold or silver fall in price? If not, why? Unless you're already fully invested, treat the decline as a gift that lets you buy more at a better price. The most profitable way to add to a position is to "buy on the dips" when you'll get more for your money. This means you'll be buying on days when the price is dropping. By averaging down, you lower your overall cost and increase your profit when you eventually sell. For me, the bigger the sell-off, the bigger the buying opportunity. 

Resolution #5: I will not continually buy and sell, or try to time the market. 

How are traders and male college freshmen alike? They chase tops and bottoms, and they don't always get what they want. 

This is how most people lose money during a bull market – by attempting to time tops and bottoms. This rarely leads to success over the long run. Just buy on pullbacks and hold until the reasons for the bull market go away. This is exactly how Doug Casey made a fortune in this industry. 

Resolution #6: I will save every month.

You want savings not just for an emergency – lost job, major repair, unexpected surgery – but also for bargain hunting. As the troubles in the world mount, the market will become littered with bargains of all kinds. Only habitual savers will have the wherewithal to take advantage of the opportunity.

Keep in mind that it isn't just about how high gold and silver prices go, but the economic and monetary climate that accompanies the rise. In my opinion, your portfolio must be able to withstand the following:
 
worldwide rejection of the U.S. dollar
high inflation or possibly hyperinflation
another recession or, worse, a depression
a vulnerable stock market
ongoing real estate woes
a large swath of municipal defaults
lackluster profits for most businesses
government attempts to "fix" the economy by printing more and more money

Is your portfolio ready for all that? Maybe so, but by following these New Year's resolutions, you can be assured that you not only avoid the inevitable consequences, but maybe earn life-changing profits as well. 

Milan anyone? 
----
[As Jeff says, it’s imperative for any savvy investor to have gold and silver in their portfolio now… including the best medium- to large-cap producers. With this strategy, BIG GOLD subscribers have seen gains of 43.1%... 56.8%... even 187.9%. Find out how you, too, can make similar profits – click here.]

.....................................................................................

Over in the options trading pit, we now have 59 winners out of 61 trades, or a 96.72% success rate. If you have any questions regarding these trades please address them through their site where they will be handled quickly and I hope efficiently.


sk chart 10 Dec 2010.JPG

The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today, before we decide to cap membership.

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.


To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here.


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Reader Comments (4)

Ah! yes that is the problem . When to buy on a pullback. Buy after a 5% drop and then watch it drop another 22% ?
And how do we know that it is not the start of a major downtrend .? Well, of course you can use technical analysis and as long as the lower upper trend line remains intact or to put it another way it continues to make higher lows you should be OK but when these break down you are likely to be put on hold by your broker as the panic ensues.
When to sell ? always the most difficult decision. If you are happy with your profits and want to spend some on yourself do so regardless of the trend , otherwise what is the point in investing?

January 11, 2011 | Unregistered Commentergold bug

There is no "Gold Mania' There will never be a gold 'Mania'. Gold is the standard by which everything else is measured. What there will be, as sure as day follows night, is an anti mania against currencies. That is what is likely to happen and it is this that will devalue the currencies to something like 50,000 dollars to the ounce of gold or say 25,000 Swiss Francs to the same ounce. The bankers think that they are gods and that the laws of economics can be changed to their will, the real G-d is going to teach them a lesson they will never forget.

January 11, 2011 | Unregistered CommenterRoger Levinson

I'm with Roger - I don't think it will be a gold mania as much as it will be a matter disdain for fiat currency ... regardless, the day my neighbours or colleagues ask me about gold, I'm selling ...

January 11, 2011 | Unregistered CommenterTJ

RE. All of the above.... Please reread resolution #3.Then read Eccl 1:9 . The lesson has already been taught and forgotten many times.

I only hope that that there are some Mini-wheats left...I hate Cherios Bye

January 11, 2011 | Unregistered CommenterWarren

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