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An example of a Silver Miner wallet

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introduction

There are no silver miner mutual funds and only two silver miner ETFs (that I know of). Some investors don’t like ETFs or don’t have access to ETFs in their country. This article gives you an example of how to create your own money miner wallet.

This is my personal money portfolio, which was built over 15+ years with the goal of being well positioned for a once in a lifetime bull market. I think that moment has arrived. Gold has been closing above $1950 for the past two weeks (which is technically a strong indication of a breakout), and I expect silver to close above 28 soon, $50 (another important technical level) and confirms the breakout of gold. If this breakout occurs, then silver has the potential to hit an ATH (all-time high) above $49.

Many investors will turn to silver miners if such a historic run occurs. This article will give you some ideas of opportunities for an alternative to silver miner ETFs.

My investment strategy has always been to reduce risk via low allocations and maximize profits with big upside potential. My goal from the beginning was to achieve a 500% return on my total cost. To achieve this lofty goal, I focused on silver investments that had a minimum potential return of 300%.

For these high returns, I used future silver prices to build my portfolio. My goal has always been $100 in cash, although $75 in cash will probably be high enough to meet my goals. I have always believed that $50 in silver was too low a goal for a long term investment. After all, we hit $49 in 2011.

So here is my money portfolio divided into categories and allocations. It includes an overview of how each section was constructed and any additional information that may apply.

Physical silver (8%)

This is my largest holding, with a cost base of 8% (of my total investment portfolio). It includes 100 oz. and 10 oz. bars, plus 1 oz. coins and American junk money (90% silver before 1965). My average cost base is $19 an ounce. You won’t be able to buy silver that cheap, but finding bullion at a 15% premium is still possible.

Use these sources to find the lowest prices or available inventory: APMEX.com, SD Bullion, JM Bullion, Provident Metals or Miles Franklin. Some of these companies sometimes have special sale prices, so join their mailing list.

Two good alternatives to physically owning silver are the PSLV ETF offered by Sprott in Canada and BullionVault.com. These are good alternatives if you don’t want to store your own money. I own PSLV and consider it one of the best physical alternatives.

My favorite bar is 10 oz. because 100 oz. bullion will not be as easy to sell when silver hits $100 ($10,000 per bullion). If you live in a metric country, the kilo bar is probably the way to go. Swiss kilo bars from Valcambi tend to have low premiums, if you can find them.

The reason my physical allocation is high (at 8%) is that the risk-reward ratio was compelling over the long term when I was stacking. The odds of silver prices well over $19 (my average cost base) are very good. You will probably buy silver at higher prices, so you might decrease your allocation. I don’t know if I would use an 8% allowance today if my average cost was $30 or more. At $30, a pre-tax return of 300% would require $120 in cash.

Minor ETFs (5%)

There are two silver miner ETFs: SIL and SILJ. I own both, with a combined cost base position of 5%. Use them (if available in your country) if you want to increase your cash allocation without incurring substantial risk. It was a good alternative for me, because I don’t want to have more than 2% allocation for a single stock. Conversely, a 3% to 5% allocation in an ETF doesn’t bother me.

Investment strategy alternative

If you’re going to invest less than $100,000 in silver and are happy with a 200%-300% return, you can focus just on physical silver and silver miner ETFs (if they are available in your country). These will be enough to give you exposure for the returns you seek. However, if you want to aim for bigger returns, let’s keep going.

Large producers (1% to 2% per stock)

There aren’t many big money makers ($1 billion market cap or more), and I own most of them. Here are the stocks I own. I only allocate 1% to 2% of my base total cost for this category. One of the advantages of large producers is that they usually pay dividends. The second benefit is that they are less risky than other silver mining stocks, creating a way to limit your overall portfolio risk.

Large producers

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Mid-level producers (1% to 2% per share)

There aren’t many mid-level moneymakers (market cap $100 million to $1 billion), and I own most of them. Here are the stocks I own. I only allocate 1% to 2% of my base total cost for this category. These stocks are what I consider to be the sweet spot for risk-reward. These are generally growth stocks and tend to have somewhat moderate risk and excellent upside potential. These are the most important actions to achieve my investment goals. Why? Because when the money goes up, so do they. It’s a correlation you can count on. If silver hits $50, stocks will be the best performers.

Mid-level producers

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Small producers (.25 to .5%)

There aren’t many small money makers (market cap

Small Producers

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Development (.35% to 1%)

A development stock is a company that is not currently producing, but is developing a project with the intention of being a producer.

Once in the development category, the level of risk increases significantly. In fact, in my experience, only about 20% of development actions pay off big (even when I pick the best ones). You can expect to lose money on many of your development games. Why? Mainly because of stock dilution. It takes a long time to develop mines and during this time they just spend money. Another reason is due to the myriad of things that can go wrong, such as permit issues, ramp-up issues, or lack of funding for capital expenditures. Many of you are probably shaking your head and saying it’s already done.

To reduce your risk, try to only invest in development parts with a path to production within three years. Also, make sure insiders own at least 25%, so they aren’t sitting ducks for low-ball takeover attempts.

Developers

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Explore (0.25% to 0.50%)

An exploration title is a company that does not intend to become a producer. On my site, I call them project generators, because that’s their job. They try to find projects that a developer/producer can turn into a mine. I often call these drill stories because you make money on future drill results. Although some of them are optional games with great resources already in the ground.

For a drill story, I prefer to keep my allowance very low at around 0.25% of my total cost. These are often lottery picks, and the risk-reward is not great. For a good set of optionality, I would allocate more, maybe up to 0.5%.

I’m always looking for a big advantage, a big alpha. It can come from a producer, but usually you need to have a great entry price for a producer to explode in value. So most of your big returns will come from development and exploration games. For this reason, you will need significant exposure to give you a good chance of finding any. That’s why I own several exploration and development games, even though I know the risk-reward ratio is not great. You can expect many of your exploration parts to perform poorly and a few to be rockets.

Exploration

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Conclusion

We experienced a 7 year base from 2013 to 2020 and then a 17 month correction since August 2020 for silver. Now it’s about to burst. I think there is a good chance that silver will go from $30 to $50 in 3-6 months this year. If this happens, silver miners will fly away.

My portfolio gives you an example (and some ideas) of how to get exposure to this upcoming breakout. Note that silver mining stocks are one of the riskiest investments. It’s a very volatile industry, with many stocks dropping 10% in one day and 50% in one week. It is not a recommended investment if you are risk averse. You must accept that silver and silver mining companies are speculative investments. This is for investors who seek alpha and accept the associated risk. Conversely, if your goal is to hedge, gold is a much better alternative.

Finally, some of you may be thinking that after creating a money wallet, what happens? How do you know when to go out? Well, you can read my exit strategy in my book, which is on my website.

Ratings

Ratings

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Categories

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