By Adam Hamilton
Gold stocks are inarguably the most-hated stock sector on the planet these days. After they spent 2013’s first half plunging precipitously, investors have left them for dead. Even most former contrarians who earned vast profits in gold stocks over a decade have gone ostrich. This is a terrible mistake, as the best times to buy low are when sectors are universally loathed. Peak bearishness occurs right before they soar.
I first wrote about ostrich investors back in early 2009, in a very different context. Ostriches are the kings of birds, mighty animals growing up to 9 feet tall and weighing up to 320 pounds! They can run well over 40 miles per hour, and their tremendously powerful kicks can even prove lethal for humans. Yet they have the metaphorical reputation of hiding their heads in the sand in the face of danger. It’s untrue, but useful.
Investors tend to take this ostrich approach in down markets. Falling prices discourage and dishearten them, and this feeds a downward spiral that eventually leaves them consumed by depression. So they withdraw, effectively burying their heads in the sand. Instead of staying abreast of markets so they can wisely buy low when bearishness peaks, they totally miss the greatest opportunities to multiply wealth.