The Mental Rollercoaster
Crafting a newsletter focused on investing can bring a rush of excitement.
There’s a unique thrill when you’ve passionately promoted an idea to readers and it succeeds.
Our goal is to support our readers in profiting and navigating these turbulent markets. So when our top recommendations perform well, it’s incredibly rewarding.
For a while, nearly all the assets we favored were climbing. Gold, silver, miners, Brazil, oil, rare earths—you name it.
We remain significantly ahead on those assets since we first introduced them, but they have dropped sharply from their peaks recently. That’s a tougher phase to experience.
Still, the choices made during these downturns are crucial. Should I attempt to time the market, increase my position, lock in gains, or simply hold steady?
Here’s my approach to these dilemmas.
Trading vs. Investing
Whenever I back a new asset, I clarify whether it’s a short-term trade or a long-term hold.
Anything under a year counts as a trade, with durations from a few days up to 11 months.
Timing is the hardest part with trades. When a trade goes well, I usually sell half after reaching a target gain and let the rest run, depending on the strength of the original premise. The Paradigm editors excel at this technique.
Positions held beyond a year are investments, and my goal is always to hold those for the long haul. For example, I owned Google stock for 15 years after its IPO before selling in 2019 (which, in retrospect, was too soon).
I’ve made some outstanding trades that shaped my portfolio dramatically, but my greatest successes come from holding valuable assets for many years. Warren Buffett famously said, “When we own outstanding businesses with outstanding managements, our favorite holding period is forever.”
Nowadays, many investors focus excessively on short-term trades and neglect long-term holdings. I believe a combination is essential. Roughly 80% of my portfolio is dedicated to long-term ideas. The Paradigm Press editors also excel in offering solid long-term recommendations. Several of our portfolio positions have been maintained for over four years with strong results. This consistency distinguishes us from other publishers.
In the Daily Reckoning, I make it clear when an idea is a trade or an investment. If I don’t specify, assume it’s for the long term.
Theory Meets Reality
My focus on gold and silver miners starting early 2025 was from the outset intended as a long-term investment.
The rationale is straightforward. The global economy is trapped in an escalating debt spiral. Trade conflicts, currency battles, and military confrontations are all unfolding.
Inflation is emerging as a worldwide challenge. Central bankers are now recalling the value of gold as a safeguard.
Precious metals and miner stocks rose faster than anticipated. After my one-year milestone, I took modest profits (~15%) to benefit from long-term capital gains, yet I continue to hold most of the position despite the severe pullback.
Watching silver surge from $32 to $115 in under a year and then drop to $68 without selling may seem risky. However, I hold because I expect it to reach at least $200 within five years, and possibly more.
Attempting to perfectly time such a volatile move is tough and often costly tax-wise, so sometimes holding steady is the best choice.
My strategy is to maintain a long-term stance since I believe we’ve entered a disruptive era marked by extensive money printing and accompanying inflation. I intend to stay the course.
My time horizon is extended, and I’m comfortable with fluctuations. Your circumstances might differ.
We’re All Unique
Your decision to buy, sell, or keep an asset depends on your personal circumstances. Consider these key aspects.
What is your investment timeframe? If you’re retired or near it, it often makes sense to take profits sooner.
Younger investors who hold solid companies usually benefit from keeping at least part of their position for the long term—provided they can handle the market’s ups and downs.
Will you panic and sell if the asset drops 30% or more? If yes, leaning towards trading might be wiser. Ultimately, all assets face significant downturns at some point.
Taxes Matter, Too
Another crucial factor: is the investment held in a taxable account or a 401(k) or IRA? This makes a big difference. Tax-sheltered retirement accounts eliminate worries about tax consequences from selling. However, holding long-term can still be sensible because timing the market can be tough.
Whether your profits are long- or short-term gains is highly relevant. In the U.S., long-term capital gains (for assets held over a year) carry a lower tax rate compared to short-term gains.
Short-term capital gains can significantly reduce returns if unchecked. In taxable accounts, these taxes can reach up to 54% in some cases (like California’s highest tax bracket). By contrast, long-term gains for the top bracket in California are around 37%. While still steep, this is far more manageable.
That’s why maximizing contributions to tax-advantaged accounts like IRAs and 401(k)s is so important. These vehicles offer exceptional benefits.
Markets today are undeniably volatile, so having a clear plan and adhering to it is critical.
We’ll continue sharing our top investment ideas and explaining different methods to manage them.
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