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How to Invest with $5,000 to $10,000Dudley Baker There are many ways to invest in the precious metals and natural resource sector. Many analysts would first suggest investors purchase gold and silver bullion or coins, then focus on some of the larger capitalized mining companies (most of which are selling for over $35 per share). You might consider the GLD or the SLV, the Exchange Traded Funds [ETFs] for gold and silver currently selling for $96 and $197, respectively. Not all investors have the financial resources necessary to purchase these alternatives. But what about the individuals with only $5,000 to $10,000 available to invest? Are they to be left out of this bull market? With limited investment funds, the above ideas are of little value due to the cost of each and the difficulty of diversifying your choices. For readers with limited resources, we can suggest some different vehicles for you to purchase, and how you can diversify with positions in several different companies. Let's explore the use of options, leaps and warrants allowing you to limit your investment exposure and still have the incredible power of leverage working for you. By selecting the right companies, options, leaps and warrants will provide you with the potential of increasing your $5,000 to $10,000 many times over. Many call options, leaps and warrants are selling for pennies allowing your $5,000 to $10,000 to be spread/diversified over several different companies. Frankly, I would suggest purchasing call options, leaps or warrants on 4 or 5 different companies. You could pick a junior gold company, a silver company, a uranium company or an oil & gas company, thus diversifying your holdings and giving yourself more chances of being correct. 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. Long-term warrants are considered to be an investment not speculation. Warrants will provide you with the opportunity to participate in this bull market with time on your side, at a much lower cost than purchasing the common shares and with 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, as an investor, seek out the best opportunities whether that is acquiring the common shares, options, leaps or warrants. And if you subscribe to PreciousMetalsWarrants, you will be steered in the right direction. Mar 13, 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 they 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 more. Precious Metals Warrants do not make any specific recommendations in their service. They do the work for you and provide you with the knowledge, trading tips and the confidence in placing your orders. For those investors seeking more knowledge on warrants do visit the Learning Center at Precious Metals Warrants, where you will find much more information and examples to enhance your learning experience. You may also sign up for The Warrant Report free weekly email. Disclaimer/Disclosure |
