Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Silver Plays a Small but Vital Role in Every Portfolio

Commodities / Gold & Silver 2019 Apr 23, 2019 - 06:38 PM GMT

By: Jared_Dillian

Commodities

Portfolio strategies like Modern Portfolio Theory and others tend to assume that market returns follow a normal distribution.

Not really.

Certain securities have high kurtosis. That is where out-of-the ordinary returns (larger or smaller) occur more frequently than the normal distribution predicts.

Of course, nobody who is stable and balanced puts 100% of their assets into something which has the possibility of extreme returns.

But risk 90 cents for the possibility of making 10 bucks? All day long.


That’s why here I’ll talk about investing in… silver.

Silver’s Role in the Portfolio

Nobody actually “invests” in silver. I am a silver investor and I wouldn’t say that I “invest” in it. I keep it around for when something crazy happens.

Here is a chart of silver going back a long time so you can see what I mean:

 

You can see “Silver Thursday” in March 1980, the result of Bunker Hunt attempting to corner the silver market. And you can see the freak-out in 2011.

So you might come to the conclusion that an asset that goes bananas every once in a while could be a good asset to hold.

Especially in light of what is going on in the world at the same time:

 

I recently talked about the 35/55/3/3/4 portfolio: 35 percent stocks, 55 percent bonds, 3 percent commodities, 3 percent gold, and 4 percent REITs (Real Estate Investment Trusts).

That portfolio gives you almost the return of the 80 percent stocks/20 percent bonds portfolio with about half the risk.

I think if you threw 1 percent silver in there, the risk characteristics get even better.

Sadly, people get a little carried away with silver, like they did a few years back. They start ordering monster boxes of coins and getting them delivered to their front door by very unhappy FedEx guys.

Silver Might Be Worth a Lot One Day

Industrial use of silver went way down after the demise of film photography. Investment demand has also pretty much dwindled to nothing. The fundamental picture is not great.

Still, you never know. Strange things can and do happen with precious metals. Palladium has gone nuts, and platinum is a fraction of what it once was.

And as I said earlier, market returns don’t follow a normal distribution. Extremely positive (and negative) returns happen much more often than a normal distribution expects them to. 

Silver looks relatively cheap. It’s about where it was in 2010, when the breakout occurred. It has done the round trip.

But that’s not why I own it, because of some subjective opinion of cheapness. We want to own it for what it does to your portfolio.

Some people like to trade silver in the futures market, which seems insane to me. Silver is notoriously difficult to trade in the short-term. It has earned the reputation of being the “rich man’s casino.” Pass.

Nobody should be trying to scalp a couple of percent out of a silver ETF. You buy it and hold it and wait for it to go 5x or 10x. And then—you actually have to sell it.

Silver miners are also a possibility. Since the bear market, many miners have become small cap stocks that are not very liquid. But they possess the same kind of periodic moonshot potential (kurtosis) that spot silver does.

But you have to be careful with miners. Do your homework.

Free Report: 5 Key ETF Trading Strategies Every Investor Should Know About

From Jared Dillian, former head of ETF trading at Lehman Brothers and renowned contrarian analyst, comes this exclusive special report. If you’re invested in ETFs, or thinking about taking the plunge into the investment vehicle everyone’s talking about, then this report is a clever—and necessary—first step. Get it now.

By Jared Dillian

© 2019 Copyright Jared Dillian - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in