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