 The Case for Bullion
By Howard Ruff
The Ruff Times
December 14th, 2006
I recently returned from the
big hard-assets conference in San Francisco, and it has confirmed
to me the huge portfolio mistake many gold-and-silver bugs are
making. Most of them seem to be looking for the one mining company
that will make them rich, and ignoring the bullion that is the
basis for this future wealth. My recommended bullion dealers
are bemoaning the fact that although the metals are in an obvious
bull market, their phones aren't ringing. Bullion and coins aren't
selling as they should, even as the metals are rising. (I have
listed my recommended bullion and coin dealers in my book and
The Ruff Times. I have no financial interest in these dealers).
This is despite the fact that
their odds of selecting the few real winners from the literally
hundreds of young mining companies, all with great stories to
tell, in booths manned by articulate young men and gorgeous models,
are against you.
A well-organized, relatively
lower-risk portfolio should be built as follows:
A bag or two of junk silver
coins (pre-1965 90% dimes, quarters and halves) as an insurance
policy against the day when the world might be littered by dead
paper dollars, killed by monetary inflation or big time terrorist
attacks on the world's monetary system, leaving gold and silver
coins as the only decent means of exchange and store of value.
Some bullion coins (eagles, krugerrands, etc.), including both
gold and silver, with the portfolio weighted toward about 60%
silver. Some gold or silver ETF shares, weighted towards silver.
Some major producers, such as Newmont (NEM) or Hecla
(HL), and some gold and silver mutual funds, as listed in my
new book, Ruff's Little Book of Big Fortunes in Gold And Silver
(available at Amazon.com
or www.rufftimes.com).
Some 2nd tier producers, such as Agnico Eagle (AEM) and Cambior
(CJE). Some well-run exploration and development companies (again
as listed in my book or newsletter).
So, why include bullion as
a base for your portfolio, instead of just mining stocks? In
the best of all possible worlds, if you are lucky enough to pick
a real mining stock winner, you can make a fortune. But what
are the odds of picking that winner? The answer is like the blend
of a elephant and a rhino "elephino, but they are heavily
against you, especially if you have tried to bet on one alleged
"hot exploration company that turns out to be not so hot.
Diversification is a valid principle to spread your risk, and
bullion or bullion coins are a necessary base.
I might suggest the Howard
Ruff Dart-board Method. Pick a list of Exploration and Development
companies (there's a list of the better ones in my book, and
a longer, updated list in The Ruff Times), put them on a dartboard,
throw darts at it and invest in ten of the holes, creating your
own little mutual fund. Then watch them carefully, get rid of
the non-performers, and switch your money into the winners. Your
odds are also improved if you buy some of the mining-stock recommendations
from one of the fine newsletter writers who specialize in analyzing
mining stocks, as recommended in my book
With the above plan, well-grounded
in bullion, you have diffused your risk, maintained your liquidity
so you can modify your strategic balance as this bull market
matures, and will profit from everything in your portfolio.
And remember, not including
gold and silver in your portfolio, will be by far the biggest
investment mistake you can make for the next several years.
Howard Ruff
The Ruff Times
Howard Ruff, the legendary
author and advisor, has been in the public eye for more than
31 years. He is the founder and editor of The Ruff Times
financial newsletter (www.rufftimes.com).
Since 1995, The Ruff Times has had more than 600,000 subscribers
the world's largest financial newsletter.
His new book, Ruff's Little
Book of Big Fortunes in Gold and Silver, is now in print.
You can order it at Amazon.com
or www.rufftimes.com.
321gold
|
