OPENING NOTE: The following is a check list I use in managing my portfolio. It is derived from a consensus of the strategies followed by my small group of experts, to the best I am able to discern them at any point in time. They are subject to change if the consensus of my experts changes. They are written to me, and I consider them rules because of my need for self-discipline. But you may consider them guidelines for use in any way you see fit.
They will never be perfect, as the experts rarely disclose their full and exact allocations, but they have served me well over the years. I have learned what to look for in their writings and interviews...the nuggets of investment wisdom, often hidden to the average investor, sometimes hidden to me also. Therefore, rule 1 is to begin with God. I ask Him to give me conviction and guidance, especially to reveal to me the experts to whom I should listen.
Seek God's guidance and conviction concerning the investment of His assets under my stewardship.
Buy only undervalued assets (preferably "hated" assets) identified by my experts, and to the extent possible, when they are buying them.
Sell only when holding an asset identified by my experts as overvalued (preferrably a "bubble"), and to the extent possible, when they are selling them.
Don't attempt short term trading, i.e. don't attempt to scalp small profits in short periods of time. Follow rules 2 and 3.
Review my portfolio allocations before doing
any transaction. If the allocations are what I want them to be, then do
nothing; OR, if I believe there is some investment which has a greater potential than one I hold, sell the lower potential investment and buy an equal dollar amount of the higher potential investment in the same allocation category. In other words, make an exchange which leaves my allocations exactly the same as they were.
If my allocations are not what I want them to
be, change them. John Maynard Keynes once said, "When things change, I change with them, what do you do, Sir?" Based on the "gravity" of the changes, I make allocation changes in one of two ways. If the changes are major (dramatic) and I sense from my experts danger in not making them, I will make them immediately. The best illustration of this can be seen in
Letter 19. I made a major re-allocation within 48 hours after writing that letter. The other type of change is by a series of measured steps over a period of time. This plan is explained
portfolio is pretty much a composite of all my experts, allocated as
follows as as of April 21, 2009: 13.7% mining stocks, 13.5% physical
gold, 18.7% physical silver, 18.4% other physical commodities and 35.7%
cash. As I have previously recommended, if you wish to replicate my
suggest you dollar cost average in measured steps and time intervals to
move from where you are to where you want to be. For
example, if you are under-allocated in gold and silver, buy the decided
upon amount at the end of each time interval, with the following
exception. Accelerate your next purchase when gold trades at 875, 830,
800, 760, 720, 650. Complete your buying if gold trades above 1000. (See
A Strategy for Accumulating Gold
and Silver.) This is a plan for phasing
into a maximum allocation of 30% (or whatever target you choose) for
gold plus silver. You will note that the 875 level on gold has already
been hit, so under this plan you would add gold or silver now.
- In a similar fashion, if
you hold any stocks other than mining shares, this is a plan for phasing
out of them in measured steps and time intervals, beginning now.
I would suggest accelerating your sell steps if the Dow hits the
following levels: 8500, 9000, 9500, 10000, 10500. Complete your selling
if the Dow hits 6500. These are arbitrary,
and can be changed based on your conviction.
I would use this re-allocation plan, and this is not easy to explain, after I had suffered significant losses due to failure to re-allocate sooner. It is an attempt to increase the probability of making the best correction possible.
Never sell any investment without considering the tax effects of the sale. This rule can be ignored when the sale occurs in an IRA, 401-K or other deferred tax plan.