Both types of investments are what are known as “niche investments”, along with other examples such as high-yield or “junk” bonds, and they can seriously mess up your portfolio by introducing wide price swings that make it very unpleasant to stay invested for the long term.

Warren Buffett has said, among multitudes of things, that you should invest in something with the idea that you can’t trade back out of it tomorrow or anytime in the next three years.  In other words, that you should have the confidence in what you’re getting into that you can, while not ignoring it, be comfortable with holding it for the long term.

Taking that approach is going to keep your investment costs down for one thing, even when you’re paying a commission to trade.  It’s also likely to help you keep your stress levels down.  If you’re the sort of person who has to read the financial pages or watch the financial TV shows every day, you’ve gotten too close to the picture.  Imagine being in an art gallery and standing with your nose two inches away from a painting and pretending to able to objectively evaluate it.  That’s roughly the same thing.

Now, if you really like gold and/or emerging market stocks (and you understand what those are), it’s okay to have a little tiny bit of them, relative to your whole portfolio.  Some people say as much as 5% of your total can be there.  I’m more comfortable with 2%.  Remember, they have wide price swings, and you’re very likely to get out of them nearly as quickly as you got in, which limits your chances of doing well and increases your trading costs.

Want to know more?  Let’s talk, and create a plan that’s right for you and your family.

Technorati Tags: Financial Ideas, Gold Investment Information, how to invest in stock, Investing strategy, Warren Buffett

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