You must have spare cash on hand, always

It's called the cost of opportunity. Suppose you come across a great sure fire winning investment and it turns out that you have no cash to invest in it! Your loss owing to being unable to avail yourself of the opportunity may be substantial but even worse, imagine how you would feel!

For instance, with the gold price bouncing around as it has been and with the extreme volatility in the markets that we will see for all time I think, WHEN does one buy a Krugerrand? Is the time now? Or is it later? Or is it 'as and when I have the money'?

The way to buy Krugerrands I feel is to buy on the dips and to take a short/medium term perspective of say 3 years. So rather than just going out and spending all your cash in one Krugerrand buying spree, save some cash for buying gold in a few weeks or next month. you NEVER know what other opportunities may arise in the short term, as in next week, and if you don't have cash on hand, guess what? You will miss out.

My rule of thumb is my max investment, say in krugerrands, would be 50% of my cash on hand at the time. I would then spread this over a few weeks, buying a few gold coins here and there, with the view to averaging my cost out over a month or two.

This way, I have money tied up in krugerrands that I don't have to liquidate immediately (although these are one of the easiest things to sell!), but I have some money on hand to be able to buy into other things as they crop up.

Jack be nimble, jack be quick - and if you run out of cash on hand then it's time to sell one of the investments you are in to get some money back into your hands. I set myself a modest minimum easy access cash amount as my spare cash on hand limit. If I need to invest this, I will invest it all but at the same time I will liquidate one of my other investments to allow me to get back to or exceed my minimum cash holding. Roughly, I think between 10 and 20% of your investments should be in free cash - this is just what works for me.

Try it and enjoy the feeling of knowing that if you need to, you can invest, immediately into an opportunity that presents itself (I refer to genuine opportunities and not these get rich quick schemes of course!).