FINANCIALLY
Speaking
The Gold Rush
by
Jeffrey M . Orth , ChFC , CASL Investment Advisor Representative of HTK
There has been a run-up in the price of gold in 2010 , extending into the 1st quarter of 2011 and I recently had a conversation with some clients that were interested in investing in this precious metal . People often want to chase last year ’ s great investment idea , essentially buying something that is currently highly priced in the hope it will go even higher . We all know the adage ‘ Buy low and sell high ’ but few of us are willing to set aside the emotion that comes with buying when prices are still on the way down , or selling when prices may still go a bit higher . Somehow , it seems to ‘ feel better ’ to buy when a positive trend has already been established .
Nearly every asset class will have its day in the sun if you wait long enough . Real estate , stocks , bonds , commodities , technology and even gold have had periods of robust gains . Chasing the current or even last year ’ s hot sector can have a powerful pull on investors , tempting them to deviate from a well thought out long term strategic allocation in favor of a more tactical approach . That approach reminds me of all the prospectors who came flooding to early California in search of gold , once word got out that others had struck it rich here . It was mostly the first people to find the gold that actually made a significant amount of money , not all those that followed the trend .
Most of the world ’ s equity market lost value during 2008 and early 2009 and there was no place to ‘ hide ’ to avoid losses . This was a traumatic time for many investors and some still wrestle with the value of long term investing and the importance of diversification . With all that has gone on in the investment world , it is more important than ever to maintain a consistent approach to core investing . What I am talking about here is building and maintaining a portfolio of carefully selected investments based on solid fundamental research that seeks to take advantage of opportunities and avoid undue risk . It is important to select investments that have been tested against down markets and have shown the ability to respond robustly when markets turn upward .
Jeffrey M . Orth is a Chartered Financial Consultant , a Certified Advisor in Senior Living , and an Investment Advisor Representative , with over 10 years experience as a business and personal planning , insurance , and wealth management specialist . Jeff is available for group lectures and private consultations . Visit his website at www . ifitfinancial . com or call 408.842.2716 .
Of course , it takes conviction and courage to remain calm during and after a period of extraordinary volatility . Remember , the fundamental principles of investing remain the same . Instead of trying to time the market or take advantage of current market momentum , successful long-term investing requires focus on strong , proven companies with a sustainable competitive advantage . It is these companies , and not simply sectors , that produce the greatest potential for long term growth . If you have your investments positioned properly , you will be ready when the next upswing in the market takes place .
Long term investors should consider a broad exposure that includes international investing that keeps risk and reward in appropriate perspective . There are extraordinary changes currently taking place in the world ’ s markets and these changes present long term investment opportunities for investors who can stay the course when the going gets tough , rather than chasing after that elusive ‘ gold ’.
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S U M M E R 2 0 1 1 G I L R O Y T O D A Y 11