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Consider the following
hypothetical scenario and typical investor conundrum:
The price of precious
metals are grinding higher, catching the attention of new investors to the
sector. The price of silver
and gold are well above their 50 and 200 day moving averages and many of
these new investors seek opinions on how to proceed. Notice that most commentators are
bullish, and price movements do not appear to have reached extreme levels in
comparison to past price movements.
But now what do you do? If
an investor buys in now they risk a drop in the currently advancing price but
if they wait they risk missing out on the next let up.
This is a scenario that we
believe is similar to today’s situation.
 
It is our
belief that if investing is too complicated the probability of success
diminishes greatly. Too many
investors seem to search for the easy, ‘can’t lose’ secret
that will guarantee instant success, but those who understand markets
understand that such a perfect solution does not exist.
There is no easy answer to
the above scenario but our approach would be to analyze the situation in an
effort to find the simplest solution.
The following is not investment advice as we are not certified
investment advisors and we do not know your specific situation, but rather it
is an explanation of our opinion regarding the preceding scenario.
We believe investors are by
far their own biggest enemy. Fear
and greed seem to take over most of their decision making, and when faced
with a scenario such as the one above, the fear of “missing out”
is often overwhelming. It is true
that an investor could miss out on a big opportunity if they do not move
quickly but at the same time they could also risk a lot of capital.
Currently we are extremely
bullish on silver and gold as we have been for many years, but we are not
planning on adding to new bullion positions at this time. Why? We think many investors misinterpret a
general statement of “being bullish” for meaning that prices will
continue higher from the exact moment of receiving the comment until the
ultimate expected high. If prices
do not instantly head higher from the time of purchase many investors become
scared, frustrated or impatient and sometimes sell before that next move
higher does in fact begin.
We believe this is the one
of the biggest flaws of the average investors’ strategy. It is true that from time to time
“mega parabolic price spikes” can shoot a particular investment
into the stratosphere and anyone not with a previously invested position will
miss out. But as a general rule
markets move up and down as investors become over enthusiastic and over
pessimistic. We try not to get
caught up in the excitement of trading and chasing the market higher. Basically we like to average into
positions when markets are not exciting and average out of markets when they
are exciting.
Are we bullish on the price
of silver and gold? Absolutely. Our portfolio is positioned to benefit
from a positive rise in the price of precious metals. It is possible that short term prices
may head higher but we are not adding to positions at these levels as we
believe that in the short term this may be a risky move.
Prices have moved very
quickly since August of 2007. They
appear to have made a very strong move but the reality is that it has taken
six months to happen. Interestingly,
it seems as though most investors will note such a positive price movement
and expect similar performance over the next week or two. Should they not get their expected
price move, they once again become frustrated and impatient. This is an emotional hurdle that
investors must learn to overcome.
In the long term we believe
prices are heading much higher and we are therefore looking for pessimism in
the precious metals market before adding to our positions. We sell into extreme optimism. We understand that we could miss out
on an opportunity to have more invested for a short term move higher, and we
are willing to risk losing that opportunity. Rather than trying to catch up to the
current markets move we try to anticipate the next markets move.
We try to take positions
when most others are not and sell when most others are not. If you are interested in learning
about how we do so, we recommend you visit our website at www.investmentscore.com. Here you may also
subscribe to our free
newsletter.
By : Michael Kilbach
Editor
Investmentscore.com
Michel Kilbach is the President and Editor or www.investmentscore.com,
an online publication designed to show investors how to make profitable entry
and exit trading decisions in high growth potential investments. Investmentscore uses a unique scoring system as a visual
guide to assist investors in making lower risk / higher reward trades.
Legal Disclaimer: No content provided as part of the
Investment Score Inc. information constitutes a recommendation that any
particular security, portfolio of securities, transaction or investment
strategy is suitable for any specific person. None of the information
providers, including the staff of Investment Score Inc. or their affiliates
will advise you personally concerning the nature, potential, value or
suitability or any particular security, portfolio of securities, transaction,
investment strategy or other matter. Investment Score Inc. its officers,
directors, employees, affiliates, suppliers, advertisers and agents may or
may not own precious metals investments at any given time. To the extent any
of the content published as part of the Investment Score Inc. information may
be deemed to be investment advice, such information is impersonal and not
tailored to the investment needs of any specific person. Investment Score
Inc. does not claim any of the information provided is complete, absolute
and/or exact. Investment Score Inc. its officers, directors, employees,
affiliates, suppliers, advertisers and agents are not qualified investment
advisers. It is recommended investors conduct their own due diligence on any
investment including seeking professional advice from a certified investment
adviser before entering into any transaction. The performance data is
supplied by sources believed to be reliable, that the calculations herein are
made using such data, and that such calculations are not guaranteed by these
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be complete. From time to time, reference may be made in our information
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may be selective, may reference only a portion of an article or
recommendation, and are likely not to be current. As markets change
continuously, previously provided information and data may no be current and
should not be relied upon.
Copyright © 2006-2007 Michael Kilbach
Information contained herein is obtained from sources believed to be reliable,
but its accuracy cannot be guaranteed. It is not intended to constitute
individual investment advice and is not designed to meet your personal
financial situation. The opinions expressed herein are those of the author and are subject to change without notice.
The information herein may become outdated and there is no obligation to
update any such information. The author,
24hGold, entities in which they have an interest, family and associates may
from time to time have positions in the securities or commodities discussed.
No part of this publication can be reproduced without the written consent of
the author.
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