Investing in Gold & Silver For Dummies. Paul Mladjenovic

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СКАЧАТЬ They see growth as the primary concern, and income (such as dividends) is either a minor or unimportant consideration.

For those who prefer choices that have greater growth potential while tolerating more risk, the range of choices are

       Major mining stocks (as a foundational choice; see Chapter 7)

       Junior mining stocks

       Junior mining stock ETFs (see Chapter 8)

       Mining stock leveraged ETFs (but not a huge amount; see Chapter 11)

      For the speculator

      A speculator seeks rapid price appreciation in the near term (over weeks or months) and accepts the possibility that volatility and (hopefully) temporary price declines may occur on the path to high potential gains.

      Speculators want to get set up for outsized gains, so they’ve done their homework and are aware of greater risks. Here are their range of choices:

       Junior mining stocks (see Chapter 7)

       Junior mining stocks leveraged ETFs (see Chapter 11)

       Long-dated call and put options (see Chapter 13)

      For the trader

      Traders are looking for gains within days or weeks typically, so they want to play volatility and don’t mind seeking short-term profits, say, being bullish on an asset this week and cashing in quickly for a profit and playing the other side (bearish) if they feel the same asset is ready to decline in price the following weeks. My associate Charlie puts it nicely: “While I play the ‘tides,’ typical traders play the ‘ripples.’”

      Traders gravitate to the following choices:

       Stocks (some play stocks directly; see Chapter 7)

       Futures (see Chapter 12)

       Options on stocks/ETFs (see Chapter 13)

       Options on futures

      Of the choices, the most common are options because they’re lower-cost vehicles and offer plenty of upside and downside volatility in the short term.

      

When it comes to stock speculating and trading, it pays to read the exploits of those who truly mastered the craft. One of the greats in the history of financial markets is Jesse Livermore. In the late 1920s, he speculated on a stock market crash (which famously occurred in late 1929), and he made $100 million on that speculation — an astounding amount at that time. His thoughts on trading can be found in the book Reminiscences of a Stock Market Operator by Edwin Lefèvre (Wiley).

Making Other Portfolio Considerations

      Often, the choices in your portfolio aren’t always 100 percent “yes or no” when it comes to making the move to purchase (or sell) an asset or investment. As you find out in this section, there can be alternate, modified ways to proceed as every investor or speculator can have different circumstances, preferences, and so on.

      Deciding on a percentage to put in metals

      The percentage to invest in precious metals is actually a personal choice, and no hard and fast formula exists for choosing how much gold and/or silver you should buy or what percentage it should be. Plenty of expert folks have an opinion on the matter, and they’re included in Appendix A.

      Part of the reason for this is that every situation is different. A senior citizen in her 80s will require much less exposure to gold and silver than someone in her 30s. Someone with positions that may get harmed by inflation will need some significant exposure to gold and silver. Check out the earlier section “Building Your Financial Profile” to see whether a particular approach appeals to you. You can also refer to the later sidebar “The Permanent Portfolio” for a technique from investment advisor Harry Browne.

      Choosing gold, silver, or both

      When knowledgeable people describe the difference between gold and silver, I like this comparison: Gold is like a jumbo airliner, while silver is like a jet fighter. Gold is that steady large vehicle, while silver can be quick and nimble. Either or both is fine. Many experts on the topic will give different answers like “have X percent in gold and Z percent in silver.” I think they both have different properties found in their related vehicles such as stocks, ETFs, and futures, but in the physical form, I am agnostic.

      

Go half and half if you aren’t sure. I personally prefer a greater percentage in silver. You may be thinking of both in investment terms, but also consider both in terms of barter. In the worst-case scenario (such as hyperinflation), gold and silver will be very tradable. Gold would be great for large purchases while silver would be great for common, everyday transactions. I think a good consideration is a third in gold and two-thirds in silver, but take into account your own personal circumstances.

      Investing for income

      Although most investors do gold and silver for appreciation such as long-term or short-term capital gains, there are ways to gain steady income from gold and silver. The most obvious are

       Dividend income from major mining stocks (see Chapter 7)

       Writing covered calls on stocks/ETFs

       Writing puts on stocks/ETFs

      

If you’re holding a mining stock that just had a great rally, that could be a good time to write a covered call on it and generate option income. Many folks have been able to generate up to 5 to 10 percent income just by being proficient on doing covered calls. Find out more in Chapter 13.

THE PERMANENT PORTFOLIO

      In early 2006, Harry Browne died. I thought it was a great loss to the investment and political world. (He ran for president on the Libertarian platform СКАЧАТЬ