Most investors are losers.
We don’t say that to be mean. We just mean that they lose money.
Not that they try to lose money on purpose.
It’s just that they don’t understand when to invest, nor in what they should invest.
How do we know? Because we see it all the time. In fact, we’ve seen it this week.
We’ve given advice, and most investors just plain ignore it…
At our conference in Port Douglas last week, global strategist Jim Rickards said this, word for word:
‘We have a US election, let’s see what happens. But I think there could be the possibility of a shock Trump victory. The markets are priced for Hillary Clinton, but if Trump wins I think gold will go up $100 an ounce overnight.’
In our view, it was the best insight from the conference.
We thought it was so good that we told you about it here as soon as we possibly could.
Since Jim made his forecast last week, the gold price has popped higher, by more than US$30. That’s a big move. Yet comparatively few people have bothered to get on board.
Why is that?
Two types of investors
Check out the chart below. It’s of the gold price:
Click to enlarge
We’ve circled the approximate time when Jim made his call on gold.
Now, granted, Jim said that gold could go up US$100 if Trump wins. Whatever the direction of the polls today, Trump hasn’t won…yet.
But this is why most investors fail.
Most folks would have listened to Jim’s comments about gold, and they’ll think, ‘Great, I’ll buy gold if Trump wins.’
That’s exactly the wrong thing to do.
If Trump wins (and the odds are moving in his favour), the gold price will likely already have moved. And even if it hasn’t moved by the full US$100 before a Trump win, the gold price will likely move so fast that most investors won’t be able to act in time.
You see, most investors are reactive rather than proactive.
Instead of looking at the market and picturing where it could be, they look at the market and think about where it has been.
The result? Most investors will then fall into one of two categories. If they see that prices are low, and have then risen, they’ll jump in and buy at the top. They were too scared to buy when the price was low.
The other type of investor, who was too scared to buy at the low, will now be too scared to buy at a higher price. They end up doing nothing…ever.
The latter is probably the worst kind of investor because they’re too timid to do anything.
A complete no-brainer investment
To our mind, the advice to buy gold is about as easy an investment decision that anyone can make.
When you invest, you have to think about the potential upside and the potential downside.
With a stock, the potential upside is (depending on the stock) 10%, 20%, 50%, 200% or more. Or it could be about grabbing dividends.
On the downside, you could lose 10%, 20%, 50% or more. Again, that depends on the stock.
Now, consider gold. What’s the upside? Well, Jim Rickards believes gold could go to US$10,000 per ounce. Whether that will actually happen or not is another thing.
(Incidentally, we see no reason why the gold price can’t at least double over the next two years, especially as central banks continue to print money, and governments go further into debt.)
But what about the downside? Could gold fall 10%, 20%, 50% or more? Sure it could. There’s no current law that fixes the gold price at a set amount.
However, it’s also worth remembering that over the long term, gold has been a great store of value. People have used gold as money and a store of wealth for thousands of years.
Yes, the gold price moves up and down all the time. But could gold go to zero…become worthless? We just don’t see that happening. Not unless some bright chemist unlocks the secret to alchemy, and the ability to turn base metals into gold.
If you think that could happen, don’t buy gold. But we don’t see that happening. And even if the gold price falls — which it could if Trump doesn’t win — in the long term, we would still own an asset that has held value for centuries.
That’s why we view buying and owning gold as a complete no-brainer investment idea. We like it for the long term, and, just as importantly, we like it for the short term — especially if Donald J Trump wins the race for the White House next week.
Publisher, Money Morning