This week is a watershed week for the market. After four weeks of gains, will the market consolidate and prepare for another leg up, or will the traders who dominate the market take us back to an up and down daily scenario? Will the Consumer Confidence report on Tuesday be a catalyst in changing the trend, or will it spark a big round of investing? On Thursday, we have the Corporate Profits, GDP, Jobless Claims, Chicago PMI, and Money Supply reports. On Friday, we have the Auto Sales, Consumer Sentiment, ISM Manufacturing, and Construction Spending reports. Will any of these reports catalyze the market one way or the other? Unless any one or all are out-of-whack from expectations, the market response could very well be more of what we have been seeing, but to a lesser degree. Now would be a time for the market to solidify, to shore up a foundation. Will it? We will see.
Rarely will I answer a question about personal portfolios, and I certainly don’t fancy myself one capable of advising others on their investment strategies. The question below, however, even though it directly corresponds to my two “don’ts” above, calls out for general comments about both the portfolio contents and the question the reader asks …
I have metals portfolio balanced with etf’s gdx, dgp, dbs, slv, and have jr mining rby – all for 5-year plan that is now going on 2 years. The portfolio has gained now over 125% so far. Do I have good long-range plan?
I don’t know if the owner of the portfolio above has any other portfolios aside from the one mentioned, but if the case is that he does not, this would suggest an “all eggs in one basket” approach to investing. Now, the common wisdom is that this is not a “safe” strategy to follow, and on the surface, this wisdom seems prudent. Is it? Maybe the writer above is 19 years old with a gift for trading or investing. If so, when young, one should take full advantage of both the willingness to take risks and whatever talents he or she possesses. Losing everything at 19 is a lot different than losing everything at 65. Then again, if the writer is, say, more advanced in age, and this is his complete portfolio, he just might want to consider a different five-year plan.
One reason to reconsider the “metals only” portfolio is that at some point, certainly within the next three years, that 62.5% year-over-year ROI will come back down to earth, and, when it lands, it might very well create a large whole that could suck up all the profit and then some. Thus, this possibility brings another piece of common wisdom to the surface – take profit when your investments rise rapidly, and a 125% gain in two years is rapid. If it were me, I would immediately take 50% off the top, and then set up strategic levels to trim more, if more is to come. The idea here is to protect your gains and diversify your portfolio. Oh, back to that old wisdom again.
Okay, so forget the wisdom part. Don’t diversify for safety alone; diversify because there are opportunities out there that don’t carry the speculative risk of metals and yet just might bring superior returns over time. One conservative thought might be high-dividend, blue-chip stocks. Another thought, if speculation is your thing, is the fledgling nanotech battery industry, or the electric-car battery industry, or …
The point is that the world is in a major technological transformation, and with some effort, you just might find a small but promising company that just might give you that same return (or greater) that you have enjoyed with your metals portfolio in the last two years.
Trade in the day; invest in your life …
