By Victor Reklaitis, MarketWatch
HOLLYWOOD, FLA. (MarketWatch) — While many investing experts advise always sticking to your game plan, Jeffrey Gundlach suggests you can take that too far.
In fact, the bond guru’s biggest mistake as an investor came when he was too narrow in his approach, he said Tuesday.
Gundlach, CEO of DoubleLine Capital, spoke briefly with MarketWatch after delivering a speech at ETF.com’s Inside ETFs conference in Hollywood, Fla.
MarketWatch : What would be your biggest mistake in all your years of investing?
Gundlach : The biggest mistake I made was not buying high-yield bonds in my total-return fund in October of 2002, when I put maximum weighting in every other strategy I ran. It’s because I was thinking too narrowly.
MarketWatch : So what’s the lesson there?
Gundlach : The lesson there is be expansive in your thinking. I was running something that was always government credit at the time, in that one strategy. All my other strategies were diversified. It was crystal clear high-yield bonds were super cheap. And I didn’t buy them because I was narrow in my thinking: “Oh, this is just a government-guaranteed thing.” What I’m saying is you can mutate your strategies, when the market offers unusual opportunities. And you should do it if it’s really compelling. I didn’t do that.
MarketWatch : It’s hard to widen one’s thinking. How do you go about doing that?
Gundlach : You have to be very patient and wait for the time period where the odds are seemingly almost 100% that new addition to your strategy will be successful. That doesn’t happen very often. It might be once, it might be twice in a decade.
MarketWatch : What’s one big thing that investors are getting wrong right now?
Gundlach : They think that Europe doing QE is going to save things.
Bullish on gold
In his keynote, Gundlach cautioned that an interest-rate hike by the Federal Reserve against a backdrop of global deflation might “court deflation.” He also said crude-oil prices won’t recover quickly and called himself bullish on gold, having increased his bet on the yellow metal a couple of weeks ago.
Gundlach previously has made a range of forecasts for 2015, including that the 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +4.40% potentially could break below its modern-era nadir of 1.38%, even as the Fed starts to raise rates.