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How to 'Invest' with $25,000 to $50,000

By Dudley Pierce Baker      Printer Friendly Version
Apr 16 2008 2:31PM

My previous article, “How to ‘Invest’ with $5,000 to $10,000”, created a lot of interest among investors so we have decided to make this a mini-series of three articles. This current article increases the investment dollars available to be invested in the natural resource sector to the $25,000 to $50,000. The final article with be for investors with $100,000 and more and will be posted next week.

As we rap up this article, we have the U.S. dollar sinking to new lows, gold up $16 and silver up $.35 at $944 and 18.20 respectively. Thus, it is important for investors to be completing their purchases of shares, warrants or leaps.

Investors with only $5,000 to $10,000 were very limited as to how to invest these monies. Now with $25,000 to $50,000, we have greater flexibility and choices as to ‘how to’ deploy these assets.

Consider these broad categories:

Cash (preferably in a currency other than the U.S. Dollar)

Bullion – gold or silver

Physical holdings – coins or bullion in your position
ETF’s – Exchange Traded Funds, GLD or SLV

Mining shares:

Producers – large cap mining producers or warrants/leaps
Junior’s – smaller development and exploration companies or warrants/leaps

Painting with a broad brush, we would suggest the following allocation and then we will make a few additional comments:

Cash  10%
Bullion – coins or bars in your possession  20%
Large cap mining shares or their long-term warrants 20%
Junior mining shares or their long-term warrants 50%

Let’s start with our 50% allocation to the junior mining sector. This group has greatly under performed and we expect a major rally in the coming weeks and months and thus want a significant amount invested in the shares, warrants or leaps of 4 or 5 of these companies.

The 10% cash suggested is for future acquisitions and preferable not in U.S. dollars.

Bullion, 20%, we now have a significant percentage in the metals, gold or silver and you could have some coins, silver bars, 10 oz or 100 oz. as we believe the days of silver below $20 will soon be over.

Large cap mining shares or their warrants/leaps of 20% rounds out our holdings to 100%. With the share prices of many of the large cap companies being over $30 per share, it will be difficult to invest these monies in more than 1 company unless we chose to use warrants or leaps. If the companies in which you are interested have long-term warrants or leaps trading then you can have much greater choices and gain the potential of increased leverage at the same time.

If you are unfamiliar with options, leaps and warrants, here is a brief overview:

Options and leaps trade on the Chicago Board Option Exchange (CBOE). They are a contract giving you, the investor, the right, but not the obligation, to purchase the underlying security at a specific price and expiring on a specific date in the future. Call options may have a life of 30 days to 1 year, while leaps may have a life of up to 2 years. Your loss is limited to your investment for these contracts and no margin is used. The potential gains are great, if you are correct in your timing and company selection.

Warrants are slightly different in that warrants trade like a stock and are issued by a company usually in an initial public offering or in a financing arrangement. Many sophisticated investors are not aware that there are many warrants trading. While it is very common for warrants to be issued in private placements, particularly in the mining sector, these warrants do not trade and thus cannot be purchased. What is of particular interest is there are numerous warrants trading which have a remaining life of 3 years or more.

Think about the possibility of a long-term warrant on one of your favorite resource companies with several years of time remaining. We consider long-term warrants to be an investment not speculation.

Warrants will provide you with the opportunity to participate in this bull market with time on your side, a much lower cost than purchasing the common shares and the power of leverage working for you. As with options and leaps, your potential loss with warrants is limited to your cost and there is no margin.

In summary, investors with limited resources to invest can have a stake in this bull market and the opportunity for incredible gains by considering the use of options, leaps and warrants. Actually, I have recently purchased some call options on a large silver company which did not have warrants trading. I am investor first and seek out the best opportunities whether that is acquiring the common shares, options, leaps or warrants.

I have just launched a new service giving subscribers, “A Look Over My Shoulder?, my personal portfolio showcasing my entire portfolio with weekly updates and comments.

For subscribers to our service, we provide a table of all resource companies with options, leaps and warrants which are currently available to assist you with making your investment decisions.

We invite you to visit our website, view and listen to our new video tutorials, spend some time in learning center and sign up for our free Monday email, The Warrant Report.

Dudley Pierce Baker
Guadalajara/Ajijic, Mexico

April 16, 2008



Dudley Baker is the owner/editor of Precious Metals Warrants, a market data service which provides you with the details on all mining & energy companies with warrants trading on the U. S. and Canadian Exchanges. As new warrants are listed for trading we alert you via an e-mail blast. You are provided with links to the companies’ websites, links to quotes and charts, tips for placing orders and much, much more. We do not make any specific recommendations in our service. We do the work for you and provide you with the knowledge, trading tips and the confidence in placing your orders.

Disclaimer/Disclosure Statement: is not an investment advisor and any reference to specific securities does not constitute a recommendation thereof. The opinions expressed herein are the express personal opinions of Dudley Baker. Neither the information, nor the opinions expressed should be construed as a solicitation to buy any securities mentioned in this Service. Examples given are only intended to make investors aware of the potential rewards of investing in Warrants. Investors are recommended to obtain the advice of a qualified investment advisor before entering into any transactions involving stocks or Warrants.