Investing with limited funds can present many challenges.
Let’s face it, if you had $1,000,000 to work with, the number of opportunities and a reasonable dollar allocation would be much easier. Who wouldn't like to have this problem?
Reality is that many—especially younger investors—are eager to participate in the markets but are at a loss as to how to proceed with $5,000 or $10,000.
Timing Your Entrance
However, before one invests, there needs to be an expectation of success. The timing of the investment is of major importance. I realize this seems very simple, but don’t forget that most investors love to buy at the highs of the markets or individual shares, and are doomed from the start. Of course they're scared to death to buy (like now) when they should be buying.
As I read the tea leaves, look at the charts of gold and silver, and listen to other colleagues in the business (i.e., Rick Rule, our friends at Casey Research, Frank Holmes, etc.) I must conclude this to be an excellent time for investors to get started, or to be involved in the natural resource sector. Yes, there could be more downside over the next few months, but it is definitely time for you to begin doing your homework and making some decisions.
Initial Investment Thoughts
It is advised to never, ever, ever put all your eggs in one basket. With $10,000 to invest we need to get creative to at least have the opportunity to make this money work for us in the most effective manner possible. In my opinion, the most effective way to invest with $10,000 would be with the use of either options, LEAPS (Long-Term Equity Anticipation Securities) or long-term stock warrants.
With the current market environment, many options, LEAPS and warrants are trading for pennies—yes, just pennies—but of course, long-term warrants with remaining lives of over 2, 3 and 4 years (and longer) will give you more time. The opportunities with some of these long-term warrants on companies that we like are staggering and could easily, in our opinion, reap gains of 500% and more. True, not all of the companies with warrants trading as well as many junior exploration companies will survive.
Proper money management and allocation of your investment dollars is critical to your overall success, so let’s explore a few ideas for you.
With $5,000 we would suggest you allocate this to four different investments. While this may not seem like much to many of you, remember, we are striving for gains of 500% and more. So many of juniors and warrants are at give away prices and offer us these unusual opportunities. With current prices of $0.10 or $0.20, that allows you to buy 5,000 to 10,000 shares or warrants, if not more for each of the four positions.
If you have $10,000 to invest, we would suggest you allocate this amount to 5 different investments. Remember, we realize that one or two of these might not work out, so we must diversify even with this relatively small amount of money.