I have long written that diversification is a very smart idea. No one can predict the future, etc. But discussed below is another reason not be 100% in ANY investment, at least for long. I ran into this argument at a gold blog.
Imagine that you are 100% invested, “All Inn”, in gold. Even if the price of gold were to go way up, there is still a big risk that many don’t see. Namely what happens if there is a big price drop JUST when the owner might NEED to sell (eg, an unexpected emergency). If our imaginary friend bought in at $1275 gold (approx. price today), and then price drops to $900 (Martin Armstrong predicts a sharp price drop like this, prior to a big price rise, a “slingshot” price rise after its initial drop).
And then, just at a bad time for the gold owner, he might need money (US dollars) to cover an unexpected $200,000 medical bill. And he if forced to sell his gold at a 25% loss to cover his bills… Ouch! It would hurt even more should gold then go to $2500 per ounce.
So, it is unwise to be All Inn on gold, even if we were to be very sure that $2500 gold is coming.
The above scenario would hold for bitcoin as well, or anything else to be held long-term.
Some of us gold owners have a saying: “Protect the precious.” That means keep some powder dry (CA$H on hand) for the unexpected.
I pretty much agree with the last sentence, it’s better to have some cash on hand always. But I have in mind a scenario which probably could put into question the logic of all the above.
Say you’ve invested in two things, gold and bitcoin. And now you urgently need money. How can you know for sure which of them to sell? Say this happened in April 2013 when bitcoin hit all times high $250 at the moment, and gold just dropped from 1,780 USD/oz in October 2012 to 1,430 USD/oz in April 2013. Wouldn’t you think then that it’s better to sell bitcoin while it’s on its peak and hold gold because it has been seeing better times? But as we all know gold has dropped since to 1,287 USD/oz, and bitcoin has risen big time.
Published at Fri, 14 Apr 2017 15:08:30 +0000
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By Philip McMaster PeacePlusOne_!/ on 2013-12-04 16:57:14
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