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What To Do When You Make A Big Bet On A Winning Position

4 August 2011 36 Comments

As gold approaches $1700, it’s safe to say that I’ve made a quality multi-year bet on the price of gold. I first got into gold in the $700 range, added to my position greatly during the 2008 crash and have essentially held on until now. Interestingly, the hard work is essentially just beginning.

Knowing when to exit a big winning position is tougher than buying a position in many cases. Gold is definitely an example of this.

This is much different than dividend stocks that I intend to hold for years and year and collect dividends and I don’t pay too much attention to the share price on a week to week basis.

Gold doesn’t pay dividends obviously so the only way you can cash in is by buying and then selling it for higher. Therefore, the exit is key.

If you read my blog, you may have mistaken me for a perma-bull gold bug. I’m not a guy that is going to tell you to always buy gold regardless of circumstances. Now I can see the value of a small permanent position of gold that is sort of akin to insurance, but that’s not what I’ve been talking about and it’s not what I’m talking about now.

I have a large overweight position in gold. It’s been 30-40% of my portfolio now for a couple years and continues to be. Again, the exit is key. There will be a time to sell my gold.

As the price of gold increases, and the stocks to gold ratio crashes (which I’ve been documenting), I start to become very alert to the price of gold and get ready to exit. Does this mean I’m going to sell soon? No. I might not even sell for a few years from now depending on a number of factors, but the reality is that it’s time to start watching a little more carefully.

At some point when stocks are much cheaper priced in gold, I’ll sell the gold and pile that cash into quality stocks. I’m on Defcon 2 right now. More later…

36 Comments »

  • Tim said:

    You've done really well. Are you invested in GLD or physical gold?

  • MarcusMan said:

    I'm curious as well… I don't plan on investing in gold at these prices but I'm curious how to even invest in gold? I suspect you're not buying gold a jeweler… lol . Is there an specific fund you buy that equates to real gold? Thanks

  • Jackie said:

    Knowing when to get out is definitely the tricky part. I have a tiny bit of gold that I bought around the same time you did. If it has been for investment purposes I’d probably have cashed out at around $1200, or $1400 for sure. But that’s because gold feels like a bet to me. I think it will probably continueto go up for another 6-12 months and then burst.

  • 20smoney said:

    My favorite gold vehicle on the market is GTU… There are too many rumors about GLD not actually owning the gold it says it owns so I stick w/ GTU.

  • 20smoney said:

    Physical gold is also a good option – check a local coin shop – but its not as liquid

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    For anyone that have doubts whether to invest in gold or not go to http://www.goldprice.net/ they can help you with all the question you have and give you the best advice for no cost just like i did a few years a go and now i see things more clear than before.

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