I think the best investment anyone starting out with a small portfolio at this time is to buy physical silver. Right IT! DT

DT – Good question, but to be clear, I’m not an investment advisor, and what I post about here is more the speculative side of the mining stocks. However, I’ll take a little time and address the question.

I do agree with you that a good place for investors to start is holding some physical metals, but I don’t really consider holding Gold or Silver in a vault, or in jewelry/coins/bars, or even in paper form through ETFs an “investment.” I consider that insurance, a diversifier, and a store of value and it isn’t necessarily supposed to provide big upside…. rather it is supposed to protect downside in other asset classes during chaos.

** For example when most asset classes got rocked to the downside in Jan/Feb of this year and the general stock markets, bonds, currencies, and cryptos, etc.. were taking a nosedive, Gold & Silver held pretty steady. That is the idea with holding the Precious Metals, but they are more of an uncorrelated asset class, and a wealth preserver (the insurance in someones portfolio).

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If an investor is just starting out with $5,000 dollars, then there still is no one-size-fits-all answer. It comes down to what their goal is for returns, and how much risk they are willing to take on, and how quickly they want to measure if their investment was a success/failure.

So, if an investor wants to just make 5-10% returns over a longer time period, then I’d likely suggest a dividend paying stock or in the resource sector a streaming company like Franco Nevada or Royal Gold or Wheaton Precious Metals, etc…

If they wanted to get a bit more aggressive and take more risk through year end, then I’d suggest an ETF like GDXJ or SILJ, with the warning the mining stocks are more volatile and they could be down 20-50% at one point, but then back up that much towards the end of the year. It would be important that they’d be able to stomach that kind of volatility and not freak out if their account is in the red by 30% for part of the year (especially if other sectors are going nuts like we saw last year with the pot stocks and cryptos and even general stock indexes).

If they wanted to take on even more risk with their seed capital of $5,000 then I’d recommend at least diversifying it into 5 companies at $1000 a piece, and if they wanted to invest in mining companies I’d suggest getting 1 solid Mid-Tier producer, 1 more leveraged Jr Producer, 1 Development stage company (Developer) w/ good economics, 2-3 payback, IRR 20%+, and 2 Exploration programs w/ good team, money in the bank for solid drilling program in 2018, and in a safer jurisdiction. This is the riskiest approach, because if the investor doesn’t understand what they are investing in, isn’t going to spend the time to do their homework and DD, and is just throwing darts, then it would be much safer to just buy an ETF diversified across 30-40 names instead. There is more upside with picking one’s own basket of stocks, but also much more risk.

If they were balls to the walls crazy and didn’t mind taking on even more risk, and really wanted to learn the basics of Technical Analysis, and spend 2-3 months paper trading without real money first, then it would make sense to discuss swing-trading positions, but most investors don’t have the knowledge & discipline, the systematic approach that they’ll stick with in good times and bad, nor the stomach for active trading. Most shouldn’t be doing it, but of course it yields the very highest returns, but also most good traders will be wrong 30-40% of the time and could have large losses. The only way trading works is to have successes that take care of the inevitable bad trades, and a good process for limiting downside losses (limit orders, stop loss trades, or be glued to a screen).

Again, there are many types of investors from longer term value “buy and hold” investors, to day traders watching the 1 minute charts and everything in between. Most investors aren’t comfortable with nearly as much risk as they may think they are and would be better off plopping some money in streamers or royalty companies or a good ETF and just letting it move it’s way through the metals cycle.

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For investing and speculation, I particularly like swing trading the mining stocks because they are so volatile and can move 5%-20% in a given day and 2-3 times that on an eventful week. However, I have money on the line that is OK for me to lose, I am diversified across a number of commodity and energy sectors, and sub-sectors (producers/developers/explorers/royalty cos).. I’ve spent years learning the basics of Technical Analysis, and have executed a large number of trades, and don’t mind insane amounts of volatility (in fact I prefer it). That is why I don’t whine if a company drops 20% 30% 40% and don’t celebrate for too long if a company goes up 40% 100% or 400%. The big wins that become multi-baggers will bail out a number of bad trades, but even then the question comes down to how long to hold before pulling profits. This comes down to technicals, but also how much profit one wants to lock in so that they can sleep at night and to manage risk accordingly.

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For example, this week on Monday, I was involved in all 3 M&A deals (Hecla/Klondex, Alio/Rye Patch, and Anaconda/Maritime). For me the big mover was Klondex that surged up 59% on Monday, but I only had 1 tranche of a position in place, and really wanted to have a 2nd & 3rd in place before the takeover happened. In addition, I was hoping it would happen at a higher level with the metals really got moving and the shareprice had moved up a lot more.

So when I considered I’d only been holding that position for a little over a week, and I personally had over a 56% return, then I cut bait and booked the profit. If I had a larger position and had gotten the 2nd and 3rd tranches in place, then I would only have trimmed some of the profits, and would have left the rest of the position in place to merge with HL and then got the shares in the new spin co as a kicker, but I had other distressed companies I wanted to deploy funds into and didn’t want to hang around for all that to play out when metals could also pull back in the interim.

So there is no shame in booking a 56% profit in a bit more than a week as that’s far more than most people’s investments will move in 2-4 years on main street, but secretly I was bummed because I was interested in building a multi-bagger return in KLDX. Still that was a nice pick up swing trade for the week.

Then on Tuesday Balmoral dropped by 37% mid-day on the temper tantrum the market threw when they had over-estimated what the maiden resource estimate would be, so I bought an initial speculative position when it was around 35% down, because the market often over-reacts, but that is still a very risky bet to take. The stock could keep sliding, rebound back on a metals rally, be dead money for a while, or could gradually creep up over time. My strategy here is to take some off the table is there is a nice rally and then leave some in place for the longer term rerating (that may take 2-3 quarters to play out). I wouldn’t advise a new investor with limited funds to make a trade like that, but it is only about 1% of my portfolio so it is just a speculative punt for me personally.

With Exploration stocks, it is best to have a basket of them, but knowing up front that only 1 in 3000 exploration targets & deposits actually gets developed into a mine so the odds are terrible. However, good soil samples, rock chips, VTEM surveys, killer drill results, a permit victory, etc.. can spike an explorer 10% 30% or even 50% in a day or two and that can really get the wheels turning. If more investors pile in the stock can go up 100-300% in a relatively short amount of time, but the key is to then take the win, as many other exploration stocks will go bust.

I’m actually conservative with a chunk of my speculative funds by betting on Producers & Royalty companies, and then take a portion and put it in Developers that have major catalyst coming up in the quarter or at least within the year. I sprinkle in a few explorers in each commodity for the upside potential, but make most of my returns off producers that get rerated, or developers that achieve their milestones and get rerated. People that bet only on Explorers are willing to take on much more risk than I, but to each their own.

Long-Term Studies Indicate Potential for a Multiyear Rally (Gold)
Gary Wagner – March 29, 2018 #TechnicalAnalysis #Video

https://thegoldforecast.com/video/long-term-studies-indicate-potential-multiyear-rally