Low, Medium, & High Risk Precious Metals Investing Strategies
Not much commentary today. Just straight up information.
For now, here are several ways to invest in precious metals. Gold, silver, platinum and palladium being the most popular.
I’ve ordered them from low to high risk. The lower the risk, the lower the returns – the higher the risk the higher the returns.
Low Risk
Physical bullion.
Gold and silver is the easiest to get your hands on.
I’ve written about it at length here, in “The No-Excuse Guide to Buy It.”
If the markets really get bad and liquidity becomes a huge issue – as in you can’t get your money out at all… then physical metals are what you want to have.
Even if it’s not a ‘financial Armageddon’ scenario, just the thought of having your wealth physically with you (as opposed to frozen in some bank account), is a reassuring feeling.
Medium Risk
Precious metals stocks.
Stocks like SLV and GLD are actually backed up with physical metals.
Of course, you are completely trusting that the management is actually following through with their commitment. You are also completely at mercy to how you sell your shares, depending on what the market is doing.
The benefit is that you are very flexible and liquid. These stocks are easy to buy and sell, and you don’t have to worry about storing physical metals.
Medium/High Risk
Precious metals miner stocks.
Companies like Barrick (ABX), Newmont (NEM), or Goldcorp (GG) are somewhat stable. They are much more connected to the price of metals, rather than there actual operations.
If metals prices start falling, these companies start to see pain, and vice versa.
High Risk
Precious metals junior mining stocks.
There are literally hundreds of companies out there.
These junior mining companies are similar to the ones listed above, only their operations are not always proven. That means that they could still go bankrupt even though metals prices are going higher.
But, that also means that their values can skyrocket if they can run an efficient company.
The big mining companies often acquire junior miners, if there are doing really well. It’s kind of like a tech giant acquiring a startup – you just hope you invest in the right startup!
Highest Risk
Trading options on any of the above methods.
I’ve talked about this method before.
(It was in relation to the VIX, which has still remained abnormally flat – so that would’ve been chalked up in the fail category, making it a high risk trade.)
The basic strategy is that you make lots of very high risk trades, that are not huge. So, you plan on losing most of the time. But, you only need one or two winners to make up for those loses. This strategy is similar to what investing legends Soros and Druckenmiller do.
This should not even be a consideration for someone looking to invest, unless they are very experienced and spending 10+ hours a day studying the markets. (And you might still get it wrong!)And remember to check out my 5 Ideas for 30% Returns.
