by Dudley Pierce Baker at Common Stock Warrants
Investing with limited funds can present many challenges.
Let’s face it, if you had $1,000,000 to work with the number of opportunities and a reasonable dollar allocation would be much easier. Who would not like to have this problem?
Reality is that many, especially younger investors, are eager to participate in the markets but are at a loss as to how to proceed with $5,000 or $10,000.
Timing Your Entrance
However, before one invests there needs to be an expectation of success. The timing of the investment is of major importance. I realize this seems very simple but don’t forget that most investors love to buy at the highs of the markets or individual shares and are doomed from the start and of course they are scared to death to buy (like now) when they should be buying.
As I read the tea leaves, look at the charts of gold and silver, listen to other colleagues in the business, i.e., Rick Rule, our friends at Casey Research, Frank Holmes, etc., I must conclude this to be an excellent time for investors to get started or to be involved in the natural resource sector. Yes, there could be more downside over the next few months, but it is definitely time for you to begin doing your homework and making some decisions.
Initial Investment Thoughts
It is advised to never, never, never put all your eggs in one basket. With $10,000 to invest we need to get creative to at least have the opportunity to make this money work for us in the most effective manner possible.
In my opinion, the most effective way to invest with $10,000 would be with the use of either, options, LEAPS (Long-Term Equity Anticipation Securities) or long term stock warrants. If you need more information on options or LEAPS visit the CBOE. For information on stock warrants visit the Learning Center on my website.
With the current market environment, many options, LEAPS and warrants are trading for pennies, yes just pennies, but of course, long-term warrants with remaining lives of over 2, 3 and 4 years and longer will give you more time. The opportunities with some of these long-term warrants on companies that we like are staggering and could easily, in our opinion, reap gains of 500% and more. True, not all of the companies with warrants trading as well as many junior exploration companies will survive.
Proper money management and allocation of your investment dollars is critical to your over all success. So let’s explore a few ideas for you.
With $5,000 we would suggest you allocate this to four different investments. While this may not seem like much to many of you, remember, we are striving for gains of 500% and more. So many of juniors and warrants are at give-a-way prices and offer us these unusual opportunities. With current prices of $0.10 or $0.20 that allows you to buy 5,000 to 10,000 shares or warrants, if not more for each of the four positions.
If you have $10,000 to invest we would suggest you allocate this amount to 5 different investments. Remember, we realize that one or two of these ‘might not’ work out so we must diversify even with this relatively small amount of money.
You say you do not have any monies to invest?
I challenge you to review your portfolio and perhaps make some difficult choices. Frankly, we disagree with some of the analysts recommending selling positions that are trading only for pennies. A hold would be a wiser decision we believe as many of these companies will come back allowing investors to recover their investments. Yes, you may raise some monies by selling but the amount after commissions may not be worth the effort. We suggest that all investors periodically review their holdings and make some decisions. Remember, we are looking for 500% gain and if you feel your current holdings do not offer this potential return, perhaps you should sell the position and move-on to more promising investments.
We’d like to rap this up by showing a chart of the TSX Venture Exchange relative to Gold that gives us a good picture of just how bad the juniors and explorations companies have performed in the last decade or so. It looks to us like it is time for the juniors to start out performing gold.
What do you think?
I don’t have a crystal ball to know what is going to happen near term, but it is either time or damn near time to step up to the plate and get positioned for the next few years in anticipation of making some excellent gains.
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Disclosure: Neither Dudley Pierce Baker nor CommonStockWarrants.com is an investment advisor and any reference to specific securities does not constitute a recommendation thereof. CommonStockWarrants.com is an online newsletter providing complete details on all stock warrants trading in the United States and Canada. The information and opinions expressed should not be construed as a solicitation to buy and securities mentioned in this service.