Investors are faced with a serious challenge: how exactly to play the beaten down precious metals sector? If anything, investors must avoid too much risk when putting capital at work so here are 4 rules on how to go about doing so in…a disciplined way.
The above comments, and those below, have been edited by munKNEE.com (Your Key to Making Money!) for the sake of clarity  and brevity (…) to provide a fast and easy read and have been excerpted from an article* by Taki Tsaklanos (secularinvestor.com) originally entitled Precious Metals Offer The Most Profitable Secular Opportunity Today and which can be read in its unabridged format HERE.
Admittedly, what follows is a contrarian approach, and it is probably not what most investors would do, but it warrants your serious consideration:
First Rule: Always stay diversified when it comes to your investments
It is imperative that the holdings in your portfolio are sufficiently spread across assets and segments (stocks, commodities, precious metals, countries, etc). This has become such a ‘cliché’ that most investors are simply neglect it but a well diversified portfolio allows one to grab the opportunity of collapsing precious metals, which, at some point in the future, will reverse their downtrend.
While the repair time will take quite a while because of the technical damage secular investors should, in the meantime, be using their time to analyze which companies are able to survive this storm, in order to make up their shortlist of future 10-baggers.
Second rule: only add gradually to your positions
Adding gradually to your positions assumes that your additional positions remain relatively small. It also assumes that you have, at all times, liquidity available. Picking a bottom or a top is a fool’s game, so your positions need to be managed, literally, over time, based on the evolution of the market.
Third rule: value will never disappear, and it will be rewarded at some point in the future
Companies that ‘possess’ true value are heavily sold right now, just like almost every company in the commodity and precious metals space, but to a less extent than their peers. Secular investors are focused on true value. Let’s face it, a miner that is producing gold at below average production cost, has a pipeline with exploration projects with high-grade metal, and has its finances under control, has value that will not magically ‘disappear.’
Fourth rule: your portfolio must be future proof
In today’s world, that means that you should anticipate rising interest rates…The top of the bond market is in, so investors should prepare for a world of rising interest rates (hence, lower bond prices). That means that your selection of assets and stocks should not contain companies that are heavily indebted. It definitely adds to the complexity, but we believe it will largely pay off in the future.
- Stay calm,
- focus on the big picture,
- manage your investments and, above all,
- manage your emotions.
Secular investing pays off over the long term.