Gyroscopic Investing

My retirement assets (401K) are invested 65/35 (traditional BH) with 5% allocated to GDX. How do others feel about a permanent 5% allocation to the precious metals and mining sector? Should this 5% include other commodities as well - e.g. DBC (diversified commodity futures)?

GDX is now 20% YTD and I am within 5% of breaking even (includes purchases in the low 20's and high 37's). I am drawn between selling a portion and re-purchasing on any pullbacks (market timing) and the alternative of holding until a re-balance band is breached. GDX went up 30% earlier this year and I watched 20% of those gains evaporate. Do others prune gains even when the asset is within tolerances? In other words, should I concern myself with such outsized gains or ignore until the portfolio is out of alignment?

What really matters is whether or not you want a permanent allocation. If you were selling all your shares with the relief that you broke even (a little over), that would be one thing. If you plan to keep a permanent allocation and you're close to it, I don't understand why you would be selling, even if the price has gone up recently.

dualstow wrote: What really matters is whether or not you want a permanent allocation. If you were selling all your shares with the relief that you broke even (a little over), that would be one thing. If you plan to keep a permanent allocation and you're close to it, I don't understand why you would be selling, even if the price has gone up recently.

I am not clear what benefit GDX provides when combined with a globally diversified portfolio (the physical metal and unexpected inflation are more closely linked). I have read of low correlations and equity-like returns, which on the surface appear to warrant a 5% allocation to the asset class. I initially invested in the ETF when prices had fallen significantly from the high...and then they proceeded lower.

In response to your question dualstow, I have already witnessed a 25% correction, a 30% gain a 20% correction and another 15% gain (20% YTD) in a short period of time. I wonder whether this volatility warrants looking at the investment independently for re-balancing purposes even if it is well within overall portfolio tolerances.

I don't know much about GDX and I don't hold it. But look at it this way: do three of the pp elements not exhibit extreme volatility? We only rebalance them according to rules, and those rules are in turn dictated by the proportion of the whole that they constitute.

If you want to hold onto GDX long term, I really think you should have some rule that supersedes any recent volatility. Sure, it's a vp holding and you could always do what your gut tells you to do. But if I were you, I'd feel better just keeping it at x% of vp or of (vp+pp) . 

It's just my 2 cents, but I'm also putting my money where my mouth is. For example, I haven't let recent swings in Tesla's (TSLA) share price dictate whether or not I sell it. I decided that beforehand.

For the novice PP investors, this question applies strictly to the VP (variable portfolio) only.

The question is whether a +/- 25% swing in a volatile asset should supersede the re-balancing bands set for the investment as a portion of the overall portfolio (e.g. 5% allocation to PMs - rebalance at 2.5% and 7.5%).

Thanks dualstow, your response is textbook buy, hold and re-balance advice. Curious whether other speculators on this forum adopt more active strategies.

I am ultimately trying to get to the point where I look at the portfolio monthly and not have to concern myself with missing out on a re-balancing opportunity.

Thats the problem when you buy something without a clue of what it is worth . I would try to find the p/b value of GDX and then look for an average p/b multiple to find what could be a "fair" value of GDX. GDX (i.e. the mining business in general) has a good history of value destruction, so i wouldn`t hold it for the long term.

frommi wrote: Thats the problem when you buy something without a clue of what it is worth . I would try to find the p/b value of GDX and then look for an average p/b multiple to find what could be a "fair" value of GDX. GDX (i.e. the mining business in general) has a good history of value destruction, so i wouldn`t hold it for the long term.

What is it worth frommi, inquiring minds want to know?

Budd:

You are not alone.
Cash was the only one of the four that I knew!

buddtholomew wrote:

frommi wrote: Thats the problem when you buy something without a clue of what it is worth . I would try to find the p/b value of GDX and then look for an average p/b multiple to find what could be a "fair" value of GDX. GDX (i.e. the mining business in general) has a good history of value destruction, so i wouldn`t hold it for the long term.

What is it worth frommi, inquiring minds want to know?

I don't know . Thats the reason i have no position there.

GDX up 15.9% since creating this thread on 7/4. Certainly complicates the decision making process, but I intend to hold the asset at 5% of VP with 25% re-balancing bands.

Until I didn't. Sold a portion of the holding on Friday at the close. I am interested to see how this market timing exercise plays out. The cash is available for reinvestment pending a 10-15% decline.

It looks like you have your decline for re-purchase

clacy wrote: It looks like you have your decline for re-purchase

GDX is ridiculous...5.5% of this slot machine is too much in my opinion. Should be more like .5%

Anyone want to take a stab at when GDX and GDXJ bottom? Maybe at $.50 a share..its REALLY ugly

Did Kshartle get banned from this website?