Investment Ideas
I promised a friend I would write up something for him about what I would invest in right now if I had the funds. I thought since hardly anyone reads this anyways (Hi Mom!) that I’ll share it with everyone else instead of sending an e-mail. It’s a bit of a duplication on my previous post.
1. iShares MSCI Japan Index Fund (Ticker: EWJ)
Basically you are buying a exchange traded fund that tracks a broad index of top Japanese companies. This is the best and cheapest way to buy into the Japanese economy that I know. The Management expense ratio is 0.59% in this fund.
Current Top Holdings:
5.75% Toyota Motor Corp
3.71% Mitsubishi Tokyo Financial Group Inc
2.83% Mizuho Financial Group Inc
1.98% Takeda Pharmaceutical Co Ltd
1.88% Honda Motor Co Ltd
1.77% Sumitomo Mitsui Financial Group Inc
1.72% Canon Inc
1.62% Matsushita Electric Industrial Co Ltd
1.54% Sony Corp
1.28% Nomura Holdings Inc
Current Top Sectors:
11.75% Banks
11.25% Automobiles & Components
10.75% Capital Goods
9.38% Technology Hardware & Equipment
8.88% Materials
7.31% Consumer Durables & Apparel
4.72% Diversified Financials
4.65% Pharmaceuticals & Biotechnology
4.49% Transportation
4.14% Utilities
2. GoldCorp (Ticker: G in Toronto)
Check out this chart which compares GoldCorp to a Gold Index Tracker. Gold has really taken off in the past few days and left gold stocks like GoldCorp behind. Now imagine if the price of gold goes to $600, $700 or $800 over the next year… GoldCorp won’t be far behind.
Alternate 2. iShares COMEX Gold Trust (Ticker: IAU)
This is an exchange trade fund that tracks the price of gold. One unit of this trust is 1/10 of the price of one oz of gold in US dollars. Management expenses at 0.4%. If you want direct exposure to the price of gold. This is cheapest way. However I’d stick with Goldcorp probably.
When to buy:
Japan:
- If you see the EWJ chart at yahoo (EWJ 3 Months) You can see we are in a bit of a dip at the moment. These are buying opportunities if you believe the market is on its way up as it helps average down
your total cost of buying. I’d suggest doing it before the end of the year if possible. The Japanese Yen has been depreciating against USDollar and other major currencies recently and is recently entered into a holding pattern. So it’s a good cheap time to buy something in Japan.
Gold:
- Ideally I would wait until the price of Gold came down a bit to re-test support at $500. However the recent price action has suggested that it could just take off and not come back for a while. It basically broke right through $500 without much resistance and just powered away when people realized it wasn’t going to have trouble staying above $500. That’s a clear sign to a lot of people that this thing is really going to go higher. I wouldn’t hestitate to get in immediately and remember to be patient for the investment to perform if it hits some temporary weakness.
When to sell:
Japan:
I would watch carefully what the Bank of Japan is doing. If they start talking more about raising interest rates in the middle of 2006 that’s a good sign. Especially if the Nikkei index continues to climb. It means Japan is officially declared out of deflation after 10 years and that means that prices are climbing and people are working. Keep holding this for a few years if it performs well and watch for something drastic to happens in Japan, the United States (biggest market for exported Japanese goods) or the rest of Asia especially with regards to China and their economy or currency (major influence in Asia and world markets).
Gold:
If everyone starts talking about gold. It’s time to sell. If the Bank of Japan raises interest rates and gold starts to fall a bit. That’s a good time to think really carefully about selling it. If other Central Banks continue to talk about wanting to buy gold, keep holding it! Don’t get greedy
with this one. It might perform amazing for a year or two and then might take it all back if you hold too long. I would view the monthly gold chart and take a look at what happened with the spike over $800 in the 1980s. It came down faster than it went up! I would sell as soon as it gets really popular with average investors and you have earned a good amount on your position. It’s hard to say when that is (or if it has even already occured!).