How to 'Invest' with $100,000

By: Dudley Baker | Thu, May 15, 2008
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For the last two days, I attended and participated in the Hard Assets Investment Conference in New York City which was well attended with many great speakers and companies. I always encourage investors to attend these conferences to get a real 'hands on feel', after all, it is your money. Meet the management, ask questions and visit newsletter writers. I would have to say, the consensus was that investors should not expect gold and silver prices to rise for perhaps the next several months and that the markets are still very vulnerable to a decline in gold into the upper 700's. That said, prices are consolidating within the long-term bull market and investors need to exercise patience and continue to seek out excellent companies and deploy their investment dollars as opportunities present themselves.

This is the last of 3 articles in our mini-series of "How to 'Invest' with.....In our first piece, we asked if the investor with only $5,000 to $10,000 of investment capital was to be left out of this bull market? We provided several ideas for investors to consider.

In our second article, "How to 'Invest' with $25,000 to $50,000" we were able to increase our investment choices for investors.

In this last piece, "How to Invest with $100,000", once again we expand upon our recommended investment choices but strongly suggest you read the previous articles for more of our comments.

First, a few overall comments; while the more investment dollars you have to invest in this natural resource sector provides you with more choices and flexibility this does not necessarily mean you will make more money or have a better return on your investments. In other words, the more dollars you have to invest, you will tend to allocate more funds to conservative positions like physical holdings. Based on our guidance, an investor with limited funds must take more risk and if we are correct that the junior mining shares and/or their warrants will soar in the coming months and years, then these investors will have the greatest return on their investments. Thus, investors, in a position to take on more risk may wish to consider our views in the first article, regardless of the amount of their investments.

Now let's get on to suggestions for those investors with $100,000 and more to invest in this natural resource and commodities bull market.

We would suggest that these investors place more investment dollars initially into cash reserves of 20% and increase physical holdings to 30%.

Initially, we would allocate $100,000 as follows:



Bullion – coins or bars in your possession


Large cap mining shares, their long-term warrants
or LEAPS, if warrants are not available


Junior mining shares or their long-term warrants


The cash reserves of 20% we suggest be deployed over the next several months in the junior mining or their long-term warrants, many of which have remaining lives of over 3 years.

Our opinion and as well as numerous newsletter writers and analysts is that silver will outperform gold and thus we would suggest your physical holdings be in silver coins, bars, 10 oz. and 100 oz.

Building on the previous articles, we would suggest you be 'fully-invested' no later than August or early September with a final portfolio allocation of:

Physical holdings - bullion


Large cap mining shares, warrants or LEAPS


Junior mining shares or their long-term warrants.


As we stated in the previous articles, the junior mining shares as a group have greatly under performed and we expect a major rally in the coming months and thus want a significant amount invested in the shares, warrants or leaps of at least 8 or 10 of these companies.

Again, it is essential for readers to have a brief overview and understanding of options, leaps and warrants, the use of which can greatly increase your investment returns, so here is some good basic information.

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 which is why 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.

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 Baker

Author: Dudley Baker

Dudley Pierce Baker
Founder/Editor - Guadalajara/Ajijic, Mexico
A Market Data Service for Warrants

Dudley Pierce Baker is the founder and editor of Common Stock Warrants and its predecessor, Precious Metals Warrants and a 1967 graduate of St. Mary’s University in San Antonio, Texas with a major in accounting.

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.

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