Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21
Scan Computers - How to Test New Systems CPU, GPU and Hard Drive Stability With Free Software - 4th Jun 21
Hedge Funds Getting Bullish on Gold - 4th Jun 21
THERE ARE NO SOLUTIONS When the Media is the VIRUS - 4th Jun 21
Investors Who Blindly Trust the ‘Experts’ Will Get Left Behind - 4th Jun 21
US Stock Market Indexes Consolidate Into Flagging Pattern – Watch For Aggressive Trending Soon - 4th Jun 21
Microsoft (MSFT) Stock Trend Analysis - 3rd Jun 21
No More Market Bloodbath – Beyond Cryptos - 3rd Jun 21
Bank run, or run from the banks? - 3rd Jun 21
This Chart Shows When Gold Stocks Will Explode - 3rd Jun 21
The Meaning Behind Gold’s Triple Top - 2nd Jun 21
Stock Market Breakout Or Breakdown – What Does The Next Big Trend Look Like? - 2nd Jun 21
Biden’s Alternate Inflation Universe - 2nd Jun 21
What You Should Know Before Buying Car Insurance - 2nd Jun 21
Amazon (AMZN) Stock Summer Prime Day Discount Sale - 1st Jun 21
Gold Investor's Survival Guide - 1st Jun 21
Silver and Copper to Benefit from Global Electrification Push - 1st Jun 21
Will Gold Shine Under Bidenomics? - 1st Jun 21
Stock Market Buy the Dip, Again?! - 1st Jun 21
Stock Market Consolidation Ahead - 1st Jun 21
Stock Market Summer Correction Review, Crypto CRASH, Bitcoin Bear Market Initial Targets - 31st May 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Habits for Confident Investors

/ Learning to Invest Jul 12, 2010 - 01:58 PM GMT

By: Frank_Holmes

Best Financial Markets Analysis ArticleA New York Times columnist is calling for another depression, volume is rising on the “double-dip” recession debate, and a well-known technical analyst is predicting that a 90 percent plunge is coming for the Dow Jones average.

Ambitious doom-and-gloomers are racing to the bottom to conjure up the most apocalyptic market scenarios – it’s small wonder why many investors are curled up in the fetal position.


In his Forbes blog, Rich Karlgaard labeled this bunch “The Men Who Want to Be Roubini – which is to say rich and famous.” The wealthy and well-known pundit Nouriel Roubini made his name as an uber-bear, but these days he doesn’t foresee a depression, a second recession or an asteroid destroying the planet.

We also don’t share the growing despair. I’ve lived through many market cycles and have learned that there are always opportunities in global markets – we’re just working harder to find them. As active managers, we use sophisticated investment processes, and we play to win. On the macro side, we believe in cycles and seasonal patterns, and that government policies are precursors to change, both domestically and internationally.

We also believe that each asset class has its own DNA when it comes to volatility. You can see this in the chart below, which shows the rolling 12-month volatility over the past 10 years for gold and gold equities compared to key large-cap and small-cap stock indexes.

Standard Deviation (as of 6/30/2010) based on 10-Year Data
Index Rolling 1 Year
NYSE Arca Gold BUGS Index (HUI) 42.3%
Russell 2000 Index (RTY) 23.2%
S&P 500 Index (SPX) 19.6%
Gold Bullion 14.8%

 

For gold, the volatility over any 12 months for the past decade is plus or minus 14.8 percent and for gold stocks (as measured by the HUI), it about three times greater – investors should look at these numbers as “normal” behavior. It may come as a surprise to some that both the S&P 500 and the Russell 2000 are both considerably more volatile than bullion.

If you don’t pay attention to volatility of gold, for instance, you'll risk being herded into buying at the top and then getting upset and selling at a loss after it corrects.
When you understand volatility, it’s easy to see how much risk you have if you’re leveraged. If you're not leveraged, you have the flexibility to be able to buy gold on down days. Volatility can help you buy gold on sale.

It's really important for people to understand that there are peaks and troughs in life and in markets, and you have to be humble when you’re at the peak and hopeful when you’re in the trough.

The image above is a familiar one to many investors – it shows the sequence of emotions during a market cycle. It’s increasingly positive on the way up to the peak, and then progressively negative on the way down to the trough before starting back up again.

The irony, of course, is that investors feel happiest when they are at the highest market peril, and they want to jump out a window when their potential upside is the greatest.

These peaks and troughs don’t correspond just to markets or to the good and bad events in your life – they’re also how you feel inside and how you respond to outside events. How you feel depends on how you see your situation. Do you have hope and confidence, or are you paralyzed by negativity and despair?

I believe the key is to separate the events in your life from how you feel about yourself as a person. If you don't, your emotions can take control and, as an investor, you end up buying at the top and selling at the bottom. When this happens, of course, problems are compounded in a downward spiral.

Actions should be shaped by beliefs and values, not emotions. When investors understand volatility, they can manage market movements better and make better decisions. They can steer their financial ship with confidence, rather than sitting powerless and being pushed around by the market’s powerful tides.

By Frank Holmes, CEO , U.S. Global Investors

Frank Holmes is CEO and chief investment officer at U.S. Global Investors , a Texas-based investment adviser that specializes in natural resources, emerging markets and global infrastructure. The company's 13 mutual funds include the Global Resources Fund (PSPFX) , Gold and Precious Metals Fund (USERX) and Global MegaTrends Fund (MEGAX) .

More timely commentary from Frank Holmes is available in his investment blog, “Frank Talk”: www.usfunds.com/franktalk .

Please consider carefully the fund's investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. Gold funds may be susceptible to adverse economic, political or regulatory developments due to concentrating in a single theme. The price of gold is subject to substantial price fluctuations over short periods of time and may be affected by unpredicted international monetary and political policies. We suggest investing no more than 5% to 10% of your portfolio in gold or gold stocks. The following securities mentioned in the article were held by one or more of U.S. Global Investors family of funds as of 12-31-07 : streetTRACKS Gold Trust.

Frank Holmes Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in