Longtime readers will remember when we described the term “volatility” in the markets as prices doing down. Lately, we’ve had real volatility – huge three-digit moves in the Dow Industrials both UP and DOWN.
Now, we’re seeing the old-fashioned type of volatility in gold, which topped $1900 per ounce just a couple of days ago. Today, after some three-digit dollar declines (a much bigger percentage decline than what was happening on the Dow), gold is back to a close of $1747.
In a discussion yesterday with a friend who actually works, rather than follows markets on a minute-by-minute basis as the media does, it turns out he thought the market was way down, as in devastated, and that gold and silver were the best ways to protect yourself from the current destruction. He did know the current prices of the metals.
Naturally, he didn’t believe us when we assured him the Dow was nearly back up to its all-time high of around 14,000. That’s down just 20%. IFO didn’t discuss her investment theories that would have saved him, if he’d been in the market to begin with. One of our prime points is to stay away from sectors that are in trouble in a big way – for the past few years those sectors have been the banks, insurance, etc. – known as financials – and real estate. We also prefer little-known, regular dividend payers and increasers.
Hence, IFO is not as far down from her high as the Dow is from its high. In fact, she’s only down about 10% to 12% from her high. She does add in her 3% dividends to her net worth, so that’s not quite a fair comparison, but still…
Perhaps it’s time to add a new rule: don’t attach yourself to a single investment strategy, but continue to review and update your ideas as you spend an hour or so a day getting informed.