Axel Merk runs the Merk Funds which specialize in unleveraged currencies. Although I own several of them I don't promote anything here, so you'll have to look up his fund website.
Merk has also written a recent book, a very sensible outline about managing your financial life. One of his long-term beliefs has been that renting a home makes more sense than buying for many people, and he and his wife have rented for years with four children, aged 2-12 years. However, we all know that buying a home isn't always just a financial decision. So it's very interesting to read his current discussion of how he came to buy at this time. http://www.sustainablewealth.org/buying-a-house-a-risky-proposition I know that some of my readers have bought or are considering buying homes at this time, so I thought Merk's story might be of some more than general interest.
Another good feature of Merk's approach in life is something I have always instinctively done and is applicable to all investment decisions, namely scenario building. Merk writes, "I am a big believer in scenario planning; if a scenario has a sufficient enough probability, then I take it into account in my investment allocation. The big advantage of scenario planning versus merely forecasting the most likely outcome is that one takes boundary conditions / black swans / flat tails / call them what you want, into account. Is a crash in this or that market likely? Possibly no, but is it a risk you can afford to ignore? It’s important to move beyond analyzing, to implementation, otherwise the exercise can be worthless, or worse, you may incur significant downside costs."
I was reminded of this approach today since I use it instead of using "stop loss" orders. When I buy a security I always have a scenario which entails situations in which the investment will work out. If the picture changes, I will often take profits "too soon". Alternatively I will not allow a position in which I have been well ahead EVER turn into a loss, so the scenario of losing is a part of every buy decision. I would rather use my discretion than a rigid price for a stop, but the discretion is bounded by an absolute rule of not letting a gain turn into a loss.
The phrase "selling too soon" I believe comes from Bernard Baruch's quip that he got rich by getting out "too soon" in 1929. Also Steve Selengut's approach of taking frequent 15% profits instead of waiting for rare "big killings" fits into this scenario. If you make a lot of small profits and rarely endure a loss, it's hard not to make money in the short or long term.
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