December 4, 2011
BY: Robert Hallberg, Topics: Trends, Precious Metals
There is an old saying that the trend is your friend and this is as true today as it was ten or twenty years ago. An investor that that can identify a positive trend and have the audacity to stay with it throughout its ups and downs is set out to make huge returns.
Most large returns are made by getting on a trend early. Identifying a new trend early requires a bit of research and some contrarian thinking as the majority of the public is often latecomers. This was the case for internet stocks at the beginning of the new millennium, as well as for real estate during this latest mania, and it will probably be the same for gold and precious metal at the end of this bull market.
The chart shows how an investor could have turned a $35 investment into over $400,000 without anytime of type of leverage, by simply identifying and investing in four major trends, one per decade. This is a powerful approach and by following the principle of trend investing you can make grand returns without actively having to managing your portfolio. As a matter of fact, research has shown that some of the best returns are made by buying the right commodity or stock and staying with it for as long as it remains viable. Some of the most successful Investors like Warren Buffet, Jim Rogers, and Peter Lynch have made their fortunes by practicing this concept.
Trend 1 Gold made a 24 X return from top to bottom between 1970 and 1980.
Trend 2 This time stocks were in favor and hot Japanese stocks (Nikkei Index) made a 5.69 X return from 1980 to 1990.
Trend 3 During the 1990 stocks were in favor, especially .coms and the Nasdaq went up 13.5 X between 1990 and 2000.
Trend 4 The latest trend is for hard assets and commodities, especially gold and precious metals. Gold has made 6 X return since year 2000, and have in all likelihood several years left to go.
By understanding trends and cycles, you can forecast future market direction and invest heavily before it reaches its peak and sell once it becomes overvalued or in bubble territory. Just keep a keen eye for new opportunities and use fluctuations to add to your position. Once a trend approaches its end, you will hear everyone talking about it; people on the street, the talking heads on television, your friends, and it will be all over the internet. By then its time to get out and find something else to invest in.
Today there is a clear trend towards higher precious metals prices, largely due to economic unrest, ballooning deficits, record debts, and currency depreciation worldwide. These themes are likely to be with as in the foreseeable future and gold and precious metals will be in an upward trend until these issues go away.
To learn more about trends and how to spot the next economic cycle read the Casey Report from Casey Research. It's a monthly investment news letter that breakdown economic trends in a way that is easy to understand. They make recommendations based on economic reality and their track record is several times better than the market or any mutual fund for that matter.blog comments powered by Disqus