Seeing the Forest for the Trees
Investing is a tough business. Regardless of whether you invest in stocks, bonds, real estate, or even artwork, it is a challenging racket that can at times seem to suck all of the energy right out of you.
One reason that many investors find investing and managing their assets so taxing is that they do not have the right mindset.
Investors are taught to consider their investments before putting capital to work in them. These considerations could include such issues as the investment amount, the risks, time horizon, liquidity, and more.
Precious metals investors may be better than average at seeing the forest through the trees. This is to say that long-term gold holders do not get overly agitated by the regular ups and downs in the market; rather they stand firm and use dips to increase their position.
A precious metals investor with the right expectations can use dollar-cost averaging strategies over time to increase their position while lowering their cost basis. These investors understand that declines will occur within the market at certain points.
Rather than sweating these declines, however, they welcome such dips as an opportunity to buy more ounces while bullion is effectively on sale.
Investors who can see the forest through the trees and remain focused on the long-term also do not maintain positions large enough to make them sweat – or lose sleep.
If you are in a position that is so large or comprises a outsized portion of your total portfolio, you may need to rethink your strategy and scale the position down. Sweating a position that is moving against you is never pleasant, and a position that is too big may also cloud your judgement.
The key to long-term focus is the ability to withstand market fluctuations along the way for price appreciation over the long run. Positions should be sized accordingly.
The gold market has risen substantially over time while also having seen significant volatility along the way.
Since the early 2000s, gold has climbed from less than $300 per ounce to over $2000 per ounce at the 2020 high. The return of several hundred percent has at times come in waves, not all waves being bullish, either.
Over the last 20 years, the market has seen some substantial selling that has seen weekly price declines of $100 or more per ounce.
To the short-term trader, these declines could be devastating. To the long-term investor, however, these declines represent an excellent opportunity to build substantial capital over the years.
With the long-term trend being higher, buying on any dips makes sense.
Investing is a game of mental fortitude. It requires skill, ambition, patience, and clarity. These qualities alone do not make an investor successful, however. The investor still needs a plan of attack.
Because gold and silver are only true forms of money that carry zero counterparty risk, it is difficult to imagine a scenario in which they do not continue to serve an essential role in a well-diversified portfolio.
For investors who can see the forest through the trees, precious metals represent tangible, inflation-resistant value with serious potential upside.