If you were a retail resource investor with 10% cash in your portfolio now, where should you invest your money for the best return? Rick Rule thinks that people like me shouldn’t be “too aggressive” and that if the average investor has 10% in cash, they should keep it there as liquidity.
What Would Rick Rule Invest in if he Wasn’t Rick Rule?
During a recent interview on MininStockEducation, Rick Rule was asked the question; “If you weren’t Rick Rule but an average investor, what would you do?”.
Rick Rule’s answer was interesting. He said that the average investor, over the recent past, has been trained to be too aggressive in their investin. Rick thinks that keeping 10% in cash as liquidity is the best choice for people like me.
“Having liquidity might allow you to take advantage of circumstances, like the ones in 2008, rather than being taken advantage of”.
Although maintaining cash in your portfolio right now means that you’re losing purchasing power every day, Rick Rule says one should consider the negative interest rates as “option payment”.
Rick Rule thinks that 10% is the bare minimum too keep in cash. So, if the average person has only 10% in cash, they’re better off keeping that money as liquidity, according to Rick.
Rick also mentioned that the average person, though probably not the readers of this blog, is underinvested in gold. Therefore, Mr. Rule reminded listeners that we should have more exposure to physical gold.
What should young people invest in?
For younger people Rick sitll thinks that the best “risk-reward juxtaposition is the uranium space”.
“I don’t see any way – over the next five years – that uranium doesn’t go from $47 to some number like $70 or $75”.
– Rick RulePreviously, Rick has told me that when the price of a commodity can go up, and should go up; it will go up.
The idea that the price of the underlying commodity has to nearly double over the next five years, means that for speculators who aren’t afraid of holding their shares over a five-year period, the “easiest” speculative opportunities are still in the uranium space.
What should older people invest in?
If the investor is an older person who doesn’t need but likes income, they might want to consider being involved in the very high quality oil and gas names that have enough free cash flow that they can maintain their capital investments and return a yield to their owners.
Another option, Rick says, is to be involved in the short-term natural resource bond market.
Alternatively, the private credit programs in the oil & gas, and mining market also offer interesting opportunities, Rick says.
“Most of the investors in our time are so focused on the upside, that they don’t understand that most of your job is reducing the down side”.
– Rick RuleConclusion
Where to invest your money depends on who you are, Rick told Bill & Brian. However, for the average investor, keeping at least 10% liquidity is what Rick Rule suggests us to consider.
If you want to carry more risk:
- For younger people: uranium, if they can stomach the volatility and afford the risk
- For older people: being on the debt side of the capital stack offers lower risk and some income
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