The Easiest Way to Invest

What should be the easiest way to invest is also the hardest for me and most other people.

It’s something that the best investors are great at and discuss frequently, but almost no one except them actually does it because it’s so difficult.

And that is to do nothing and wait until a great opportunity comes along.

These two quotes from Warren Buffett and Jim Rogers exemplify what I’m talking about:

"The trick in investing is just to sit there and watch pitch after pitch go by and wait for the one right in your sweet spot. And if people are yelling, ‘Swing, you bum!,’ ignore them."

— Warren Buffett

"I just wait until there is money lying in the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime."

— Jim Rogers

This does not mean that we are waiting for something that we know is a sure thing. Nothing ever is. It’s just that when the market offers trades or investments that have really good odds of working out and align with our investment strategy, we should take them. Otherwise, it’s best to “do nothing.”

I am as guilty as anyone else of being too active. I overtrade at times, buy things that have average risk/rewards, and occasionally buy “hot tip” stocks. But I try to keep that small and not a big part of my overall portfolio.

For the rest of my portfolio, I try to follow this strategy and only take chances that I really like. I’ll give you a personal example of a recent fat pitch that has been working well.

I have been very focused on gold recently, but I am not a “gold bug” who likes gold no matter what. In fact, I stayed away from gold for the last few years because I felt the risk/reward in the equities wasn’t good enough.

Then, mid-last year, I started to hear more and more value-oriented managers talk about how cheap gold equities were.

So I took a look.

And what I saw was gold-related equities going down in a straight line, while the price of gold was shooting up.

That got me interested.

What I found was that non-Western central banks had been buying en masse. And the more I thought about it, the more I realized: why would they sell or stop buying?

After the Russian invasion of Ukraine and its aftermath, many countries around the world began diversifying away from Western currencies to avoid finding themselves in a situation similar to Russia's. But what are they going to buy instead?

Gold seems to be the only obvious alternative.

And on top of that, Western investor demand isn’t even here yet because they are incredibly risk-on still. So if they have any reason to buy in the next few years, that’s additional demand for gold.

So I thought: demand seems to be robust and supply is limited, which should continue to boost prices for gold, translating into good earnings for gold companies. At the time, these companies were incredibly cheap based on potential cash flow at the elevated gold price levels.

And the charts looked great. Late last year and early this year, I started seeing these stocks reaching what looked like a multi-year bottom, but they didn’t go lower. Instead, they bounced higher, and investor sentiment was perking up.

At the time, it didn’t mean gold equities were a sure thing. There is always an element of luck involved. But this felt like a fat pitch or a moment where there was money lying in the corner, waiting to be picked up. So I took it.

I think gold equities are still cheap, and the reasons for gold to stay elevated are just as good now as they were early this year. However, we need to be careful which equities to pick. It’s still a fairly fat pitch trade if you have a long-term horizon, but it’s time to be a bit more cautious.

There are other areas of the market that are starting to look great as well, but nothing completely obvious yet to me. I am always looking out for other opportunities that could be the next fat pitch trade and will write them up here when I find one with good potential.

Thanks for reading and have a great weekend!

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Disclaimer: This article is for informational purposes only and does not constitute investing advice. Please consult with a qualified financial advisor before making any investment decisions.