"How are you? It's been a colourful couple of days in the markets, to say the very least, and like your colleague at work I too attempted to play chicken with silver last week but the swings eventually took their psychological toll and I bailed before the decent money could be made. Still, an enjoyable experience, in a way.

"David, I have two questions:

1. I have been trying to employ your Baby Steps trading method for a little while. Following your example I have used the 30yr treasures as my instrument of choice. I have had a little success, partly due to mimicking your trades, but also because the price action seems to be a little more stately, than say, our old friend Scary Silver. The 30yr treasuries are in a trading range, of sorts, making them suitable for this method. Are there any other market characteristics that make Baby Steps a suitable method of trading?

2. You have often expressed a preference for closed-end investment trusts, and have a couple of them in your top-10 long term investments. Why do you do choose these trusts over say individual shares or ETFs? I would like to gain a little exposure to India and China and I believe you have a couple of these trusts in your portfolio. Are they suitable for a private investor looking to gain exposure to these markets?

"I'm also looking closely at the BlackRock World Mining Trust and the above applies to this also."

David Fuller's view I am recovering from my minor but nagging virus, thanks. Yes, the markets have been very "colourful" and your description indicates your resilience.

Regarding Baby Steps, I trust you have read the original articles.


A 'Search' of the Archive (fourth item down on the menu upper left) currently produces 288 entries on Baby Steps so it has been discussed on a number of occasions since Fullermoney became a fully online service.

The Baby Steps tactic is safest in a market that is fundamentally cheap but rangebound, probably because it is in a base formation stage. For instance, over the last decade, I used Baby Steps most actively when trading silver, only from the long side, approximately 6 to 10 years ago. One can also use a modified Baby Steps technique in a market that is trending but in a somewhat volatile fashion. In other words, if it runs ahead, reduce the position somewhat, and repurchase on the next setback, provided it is still in a medium-term trend defined by a rising 200-day moving average.

Regarding investment trusts (ITs), the ones that were launched at least a decade ago usually have lower management fees than most other types of managed funds. They trade like shares and are therefore easy to deal in. They usually sell at a discount to NAV, which appeals to me when buying. Occasionally, they move to a premium when the underlying instruments are very fashionable, in which case it is usually a good idea to take some profits. Where available, I have favoured ITs in markets where I want broader coverage than the individual shares which I might acquire, plus some management expertise. I think they are particularly suitable for private investors, which is what I am.

I do not like the hidden costs with ETFs that are index trackers and they too often underperform their benchmarks. These costs are lower with a single-market ETF, such as a bullion fund.