Friday, January 25, 2013

Views On Long Term Investing

I have drifted over time to a view on longer term holds rather than short term hit & run type investments. I may not have timed this right since so many are making quick cash with this type of investment style in this fragile economy.

The main reason I decided to walk away from the fast food style of trades on adrenaline was that it's so unpredictable and so very stressful. I found myself checking the markets long after they were closed and scouring the internet for updates on the high action stock I didn't sell before the end of the day. This stress is amplified if I didn't sell on Friday because now my whole family life is effected. Fortunes are won and lost very easily but more is lost on indecision it seems. To react is natural, to over react is a predicted response we need to control. I have decided to take more time for myself and family this year and this suits a slower long term style of investing.

I usually break up my trading day by going for a hike and as I go along I parallel my new stance on investing to a journey not yet taken. The route I take is winding and has several small hills. This means peaks and valleys with a lot of blind corners ahead. I can never see my end point until I am about 50 yards away yet I am driven knowing it's there and that I am close to my goal for the day. Sure I get passed by runners and I do pass old people struggling on the hills but I stick to my pace and never fear the next corner or steep hill. We all need to find our own pace and I try to respond to the countless tips I get on a daily basis but lets face it you can't kiss all the girls.

I recently started tracking good dividend stocks that have consistently paid out to share holders and it's been an education. I have known a lot of people in these types of investments but lets face it unless you have a big position your dividend is tiny. But once you are more seasoned and have the assets to park then you can imagine how this would play a good role in addition to any day trading you want to do. If I take a million dollars and put it in the bank the savings account will give me about $15,000 a year in interest. A GIC I can get $20,000 for if I pick a longer term lock in period. The bank rates vary so it's something to investigate when you have time.

Now lets imagine I have a million dollars I want to split into 4 dividend stocks that average 6-12% per year the past 5 years. I would go based on 8% and I am already at an $80,000 return each year which is not a bad top up to someones salary or retirement. Some people are reading this and saying to themselves they already know all this but you know I never spent anytime on it until recently. I was so caught up in making quick returns that I forgot to take some profits out for long term growth in case the economy starts to sink, like it is now.

I am always searching for new ideas and new approaches to investing because the economy is forever changing. Whats hot now will be forgotten in 5 years time. A tech bubble can be followed by a gold bubble that is then followed by a long period of indecision. I see it happening already, people are pulling back from tech stocks with little or no profit and heading down the path of a global hunger for gold. This may become a super bubble as some analysts have already started to coin the term in the media. I see the drive coming mentally but I honestly don't see the mechanics of the drive itself.

Gold climbs yet the juniors sink and the majors stay the same. None of this makes sense when you step back. Some even believe that governments are falsely stating gold reserves so as to not cause premature panic buying. The reality is though that buying is up and inventory is down. There is only so much gold on the planet and as well we have global hoarders that want to buy and hold in case we see $10,000 an ounce gold prices. We all know what happens when you shake a can of soda before you pop the lid. This seems like a super bubble trying to get out of the gate and some nations are trying their best to hold it back. Once this does start to run the implications could shock everyone. No one really wants $10,000 an ounce gold prices but lets face it the markets don't seem to accurately value gold juniors right now.

The risk taker in me scours the markets for juniors with low floats and good land positions knowing they will get eaten up. I believe there will be a big surge in mergers & acquisitions in the gold sector the likes of which have never been seen in history. We will be part of it. I think the only way to off-set the negatives on other sectors is to have a good balance of gold juniors in your portfolio. If you can't beat them, join them.


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