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What to do with paper loss of Precious Metals?
Old 12-08-2015, 01:16 PM   #1
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What to do with paper loss of Precious Metals?

So when I originally started investing, my biggest early mistake BY FAR was investing heavily in a precious metals mutual fund (TDB648) by an advisor's awful recommendation.

I've done mostly well otherwise but that portion of my portfolio is down about 50%! Anyone in precious metals in the last several years knows this pain.

I've held it since 2011 (the worst time to go in) and I've stuck it out and held it, and even added to it, which is normally good investor behavior. Currently precious metals are sitting at a ~7 year low. But down and down and down it continues to go. Long term forecasts are all over the place, as of course no one really knows what the future holds.

I have learned a lot since then and I am very eager to correct this mistake and get out of sector funds and never get back into them ever again.

I could take the realized loss and convert what's left into my other index funds, which will probably do better in the long run. Or I could wait, for potentially several more years for precious metals to go back up, missing out on years of growth. What to do, what to do

Anyone else in the same boat? Any opinion or perspective on this is appreciated.
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Old 12-08-2015, 01:20 PM   #2
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If taxable account, sell to lock in the loss, reinvest in what you want and then sell some of your winners to utilize the loss and then reinvest. Essentially you will get a stepped up basis in what you buy at no cost.

If a tax-deferred account then just sell and reinvest in what you want.
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Old 12-08-2015, 01:21 PM   #3
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I'm not in tthe same boat because I always tax-loss harvest losers every year in order to prevent the behavioral finance trap of loss aversion and get others to pay for my losses.

But you appear to be Canadian, so I do not about your taxes.

I'd sell anyways and move on. By not selling in 2011, you have miss out on a lot of gains elsewhere, so there is a lesson to be learned here.
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Old 12-08-2015, 01:42 PM   #4
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But you appear to be Canadian, so I do not about your taxes.
I didn't know we had annexed Michigan!
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Old 12-08-2015, 01:57 PM   #5
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...But you appear to be Canadian, so I do not about your taxes.
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I didn't know we had annexed Michigan!
No, no, no, Meadbh. RioIndy just looks Canadian.
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Old 12-08-2015, 02:07 PM   #6
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...................

I have learned a lot since then and I am very eager to correct this mistake and get out of sector funds and never get back into them ever again.

I could take the realized loss and convert what's left into my other index funds, which will probably do better in the long run. Or I could wait, for potentially several more years for precious metals to go back up, missing out on years of growth. What to do, what to do

......................................
makes one wonder what you have learned...........some recommend asking yourself if you were not in this fund now, would you invest in it now.........to separate the investment decision from the already-own-it-got-to-break-even syndrome.
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Old 12-08-2015, 02:11 PM   #7
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I didn't know we had annexed Michigan!
Me neither, but it sounds like a grand idea.

But then again, depending on the results of the 2016 US presidential election there may be a number of states interested in seceding to Canada.
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Old 12-08-2015, 02:26 PM   #8
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Me neither, but it sounds like a grand idea.
I doubt if Canada wants to put up with the Yooper jokes. They're already saddled with too many Newfie jokes.




[Meaning no offense to anyone: I love both places!]
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Old 12-08-2015, 06:05 PM   #9
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If taxable account, sell to lock in the loss, reinvest in what you want and then sell some of your winners to utilize the loss and then reinvest. Essentially you will get a stepped up basis in what you buy at no cost.

If a tax-deferred account then just sell and reinvest in what you want.
+1. Nice time to recognize losses if you can.

Not a lot of years since 2011. While I don't have gold in my portfolio, I'd stick with it for a few more years. If inflation picks up it might do a bit better. I have a few funds that are down 50% or more right now. I'm just buying more, though all are more diversified than gold.
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Old 12-09-2015, 08:30 AM   #10
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First of all this is not a fund invested in precious metals but miners of precious metals in Canada. Most of the companies this fund invests in are small companies that make money on the margin of gold, silver and platinum. When the prices sunk the leverage they have cause the companies to implode, the prospectus of this fund gives it the highest risk rating of the fund family and subject to wide price swings, so by definition this is not a fund that overs a conservative long term way to grow a portfolio. It's design is to be high risk reward and it has gone downhill. I would never invest in any of these companies and far rather have the same amount of money invested in the physical assets as an investment in real assets. It does not seem to be a normal type of fund for investing in precious metals type of fund.
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Old 12-09-2015, 11:45 PM   #11
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Actually these are the major gold miners in the world today. They are "small" only because gold miners are all relatively small, especially today. If you are a momentum investor these obviously have no upward momentum. However unlike some other commodity companies they are not going down much any longer. If you think that the gold price will never recover, grab whatever currently excited you. Otherwise sell this and buy one of 2 or 3 gold mine ETFs that have much lower expenses, unless this is somehow a huge part of your allocation. But if it is 2 or 3 percent, not necessarily a bad idea. What is usually a bad idea is to buy a cyclical commodity high, then turn around and sell it low.

Sometimes the metal is high relative to the miners, sometimes that is reversed. Right now, the metal is fairly low, and the miners are very cheap relative to the metals. So unless you think that the cycle has been repealed, or you need to cut down, or you just no longer want to be reminded of what seems like a mistake, say in the race but change horses.

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Old 12-10-2015, 01:56 AM   #12
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At the risk of being out of the precious metals market for a month (to avoid wash sale), you could harvest the losses now to offset capital gains on other investments. That's what I would do. This is a way to capture the value of your loss as a higher cost basis in other investments, decreasing capital gains tax later (assuming that you will have to pay capital gains tax eventually).

Whatever you do, don't do it because you bought high and you want to wait for the price to come back up before you sell. Make your decision based on the situation today, and how you want to invest your money going forward, not looking backward.
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Old 12-10-2015, 01:54 PM   #13
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I could have written you post. We bought a fairly large amount of Precious Metals in 2011 (USAGX) and lost over 50% of it's value over the last 4 years. We held onto that fund and kept thinking it would turn around soon, but that never happened. Earlier this year, we bite the bullet and sold the funds at a pretty big loss. But we have no regrets. We reinvested the money elsewhere (taxable account) and those funds have been doing better, although still a lot less than the loss from the Precious Metals. We have no more sector funds in our portfolio. We just don't like that level of risk in one type of fund. Good luck on your decision! It was tough and I feel your pain.
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Old 12-10-2015, 05:30 PM   #14
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To me, precious metals (and miners) are a hedge.

Whether to sell them depends on how much you want or need the hedge.
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Old 12-10-2015, 05:36 PM   #15
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You can sell covered calls for a while, out of the money, and take in some premium. Sell them 4 weeks out or so. Slightly out of the money.

If they get sold, you at least recover some small premium from the option.
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Old 12-11-2015, 10:25 AM   #16
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You could sell the gold and buy oil . Since you bought gold at the top... Maybe you get oil at the bottom . Of course "bottom" and "top" tend to bedevil our judgement it seems

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Old 12-11-2015, 10:47 AM   #17
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I've been selling and buying other gold holdings to recognize tax losses for 2-3 years.
It's tough to maintain the position when it's going down.

I try to appease myself by remembering, A truly diversified portfolio always has SOMETHING that is going down in value.
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Old 12-11-2015, 11:05 AM   #18
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If you sell it now the Tax write off is only $3K per year. Many economists point out that we are sliding into recession in 2016, that is why all commodities are going down. What the Feds are going to do? There is possibility that they will restart QE, go negative rates or other ways to weaken the dollar what is going to be positive for commodities including Gold mines.
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Old 12-11-2015, 02:05 PM   #19
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Since we don't know what portion of the OP's total portfolio this mining fund makes up, and what his target allocation is for this asset class, I'm not sure we can really answer the question.
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Old 12-11-2015, 02:36 PM   #20
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Since we don't know what portion of the OP's total portfolio this mining fund makes up, and what his target allocation is for this asset class, I'm not sure we can really answer the question.
What? The OP is clearly suffering from loss aversion and we can really answer the question about whether to sell or not without any problem. The OP has probably already sold.

Or maybe you are writing about the last question "Anyone else in the same boat?", then I apologize because I don't know if anybody else bought TDB648 back in 2011. LOL!
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