You Can’t Limit Yourself In a Market Like This

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Dear Reader,

When it comes to investing everyone is different.

As I like to tell people, sticking to your strengths is always the best course of action. Whether that is certain markets, industries, or even unique financial instruments.

This is especially important in tough times, such as our current predicament.

Personally, I’m still a keen proponent of stocks. But obviously no one is going to have intimate knowledge of every stock across the entire market. That’s just simply too much work.

Instead, when I’m looking at stocks, I hunt for themes. Companies or industries that are often part of a bigger trend. Especially those that I’m familiar with.

If I’m unfamiliar with a stock then I’m not going to invest in it or recommend it without doing some digging. I have to be able to at least understand what they do and how they do it before I will part with my money. And I suggest every investor should do the same.

Same thing goes for another investing favourite of mine: cryptocurrency.

There are a lot of complex, forward-thinking crypto projects out there. Often with some serious brain power behind them. Some of which can even go over my head at times.

And when that is the case, no matter how great the idea may seem, I won’t put any money towards it. Because if I can’t comprehend it, I can’t trust it.

Which brings me to the subject of today’s article…


All that shines

When it comes to gold, I’m (normally) a bit of a pessimist.

It’s not that I think it’s a bad investment. Quite the opposite actually. Gold serves an important purpose in market dynamics. It’s a safe haven for capital in times of uncertainty.

Personally though, I have never had an interest in investing in it.

This week, that changed.

I now own some gold. And I don’t mean gold mining stocks. I mean a very small amount of physical gold. Five grams to be exact.

Any gold bugs out there will realise it’s not much. Just a token amount really, nothing serious. But again, I never thought I’d actually buy gold ever.

The reason for my purchase?

The US Federal Reserve.

See, right now I’m not worried about toilet paper, hand sanitiser, or tissues. I’m worried about the Aussie dollar. Mainly due to the fact that it is in freefall against the greenback.

Indeed, many currencies around the world are buckling.

Not the USD though, it is soaring due to demand. Why? Because the world still relies on it as the preeminent reserve currency. And now that the you-know-what has hit the fan, everyone wants more of them.

So, while the Fed is throwing money at US banks and businesses, what I’m worried about is whether it’ll throw money at other markets. Because until they do we’ll keep seeing currencies, like the Aussie dollar, continue to tank.

Normally that would be good for our nation as a whole. A low dollar usually results in more exports and tourism. Boosting our local economy.

With this pandemic in full swing though, that is unlikely to happen this time around. Instead, we’re just going to put up with higher import costs. Meaning higher prices for all manner of goods for consumers and businesses.

That’s bad news for your weekly shopping trip, and bad news for smaller retailers. And the longer and harder the dollar falls, the worse it could get.

Point is, I am quickly losing faith in the dollar altogether. So rather than store some of my wealth in cash, I opted for gold.

Where it all ends

Ultimately, no one knows how all this will end.

I am expecting things to get worse before they get better though. Whether that means I’ll be buying more gold or not, I couldn’t tell you. This is a day-by-day market we’re in right now.

Long term though, I suspect the rebound will be big.

Really big.

Already myself and my colleagues are looking for areas of interest. Industries or markets that could be primed for major moves once this virus is dealt with.

One such area is indeed gold. And this time I am talking about the miners.

Shae Russell, editor of The Daily Reckoning Australia, believes gold could be in store for its third ‘Great Bull Run. Potentially echoing some of the staggering returns of the 1970s. You can read more about this opportunity, for free, right here.

Even if you’re not an avid gold investor, like myself, it’s worth looking over. Not just for some historical context, but also an insight into how panics distort markets. Distortions that present both crises and opportunity.

Granted, it is the latter that we’re far more interested in here at Money Morning.

It might not seem like it at the moment, but opportunities do abound. Amongst all the pandemonium there is potential. You just have to wait for the right time to capitalise upon it.

That might mean having to broaden beyond your comfort zone. Just like I have with my small gold purchase.

In a market like this you can’t limit yourself.

However, you do still have to stay calm, stay rational, and most importantly, stay alert.

Right now, those are the greatest strengths any investor can have.


Ryan Clarkson-Ledward,
Editor, Money Weekend

About Ryan Clarkson-Ledward

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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