Asset Allocation: Using Our Portfolio To Build Your Portfolio

Readers have been asking for guidance on how to turn this newsletter’s (admittedly a bit bloated) Portfolio into something manageable for an individual investor. So here’s some general guidance:

DO NOT try to time this market. The commodities bull has years, if not decades, to run, and trading in and out to exploit squiggles in the S&P 500 or NASDAQ is wasted effort. Unlike CEOs and congressmen, we normies lack the kind of inside information that lets us see big near-term trend changes. So this newsletter’s recommendations are meant to last for years, not weeks or months.

If something is listed in the main part of the Portfolio, it’s a “buy.” When a stock doesn’t work out, it goes into the “Removed From Portfolio” list, which currently includes only seven names.

But rebalancing is okay. If a holding (like, say, silver) rises to become an uncomfortably large part of your net worth, lightening up on that big winner is justifiable even if its prospects remain favorable. This falls under the heading of “Problems everyone wishes they had.”

Start With the Leaders

Go to the Table of Contents and read some of the 2023 posts that introduce the various categories (precious metals, energy stocks, physical ETFs, equity ETFs, royalty companies, etc). You’ll want to know what these things are and why they’re attractive before buying them.

Once you understand the basic concepts, start buying the least risky assets, more or less in this order:

• Physical precious metals, stored in an accessible place.

• ETFs that own physical precious metals and other commodities like copper and uranium, held in your brokerage account.

• ETFs that hold the shares of miners and royalty companies.

• Large-cap stocks (see the Portfolio’s “Market Capitalization” column).

• Mid-tier miners and royalty companies.

• Small-cap miners and royalty companies.

• Micro-cap explorers.

Always Be Learning

The main function of your initial positions is to give you an incentive to learn about what you own. Only move down the size ladder when you understand the basics of the business and the traits that separate winners and losers in the next lower category.

Over-Weight the Safest Assets

You should own more physical metals than large-cap stocks, and more large-cap stocks than mid-tiers, etc. Dabble in micro-caps to spice things up and turbo-charge the learning process, but approach any sub-billion-dollar market cap with extreme caution.

When to Sell

Other than rebalancing something that’s way up, there’s no reason to sell this early in a bull market. That time will come, and when it does, it will be extremely stressful. Selling a big winner is emotionally much harder than buying something that’s way down.

So “when to sell” is a (happy) problem for another time. For now, we should gradually and opportunistically accumulate good names as the currency crisis plays out. Enjoy the ride!