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How the Middle East Affects Investing

Seth Jentner08/07/2012

There is quite a bit of unease about Egypt and Iran. With much of the world’s oil transported through the Suez Canal and the Strait of Hormuz, there is reason for concern. During frightening times, many people advocate purchasing gold and oil commodities.

Should Middle East concerns become our concerns and impact our investment decisions?

Clearly, world news has an effect on our investments as the markets react. But does this create a buying opportunity in precious metals or energy?

While there may be opportunities to make money, we recommend going a step further. Most of our client portfolios already own positions in commodities, such as metals and energy. Rather than reacting to the news and trying to buy into these asset classes after the news hits the street and after the price of these investments has already increased, these investments are already in our clients’ portfolios. Thusly, our clients receive the benefit of the initial upswing in value. We also look for opportunities to capitalize on these price increases by taking some of the investment gains and using the proceeds to purchase those investments that are now undervalued.

Most people wait until the news is good before investing. By then, prices have already increased, and the initial returns are missed. While it may go against one’s emotional comfort, it is preferable to purchase an investment while its price is low to take advantage of potential, future price increases. A broad, globally diversified investment portfolio enables an investor to participate before the news is good while not betting on one company, country or asset class for investment success.

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