Gold & Silver Portfolio Structure

At Sunshine Profits, we believe that the most important thing responsible for growth of your portfolio on the long-term is diversification.

Even if it's not really a gold portfolio, silver portfolio or not a precious metals portfolio at all

We can't stress enough just how important it is! Diversification enables you to achieve 3 important goals at the same time:

  • It limits risk,
  • It provides significant upside potential along with exposure to the great bull market in silver and gold. And...
  • It takes into account all important factors that may come into play in the following years like a collapse of financial system, and lack thereof.

Before we continue, let's make it clear that we are talking about a pure precious metals portfolio. We are not talking about a stock-bonds portfolio with an addition of precious metals. We assume you agree that the place to invest for at least a year is the precious metals market. We believe, by the way, that it's most likely the place to invest for much longer than a year...

So, let’s get into the details of how Sunshine Profits suggests you structure your precious metals portfolio.

In order to achieve all 3 previously mentioned goals, we recommend you divide your portfolio into 3 main parts:

  • First, Insurance – which protects you against the large financial crisis that is very likely to be seen in the next decade. You may have read somewhere that even those who hate gold and silver should still own some "just in case." It’s essential that the insurance part of your portfolio is held in physical bullion, and is spread out among different geographic regions at all times, if possible - even when you think that gold and silver may decline.
  • The second part of your portfolio, Investment – is intended for profiting from the long-term rise in the prices of precious metals due to their secular bull market. The investment part of your portfolio allows you to temporarily limit the exposure by hedging or selling your holdings before highly probable and significant declines (like the one seen in year 2008). The sizes of positions established here are usually significant compared to speculative trades, as long-term investing is usually done with much greater confidence than short-term trading. This is because long-term moves are driven by fundamental factors and thorough analysis can significantly increase the probability of being correct about the trend's direction.
  • And last, but not necessarily the least part of your portfolio is Trading capital – which you use for betting on short-term rallies and/or declines in gold, silver and/or mining stocks.

Let's look into the reasoning behind dividing your portfolio into Insurance, Investment, and Trading Capital.

The point of investing money is to make money and not to lose it. Sounds obvious but keeping that principle in mind will help you deal with the concept of risk. The problem with investments and virtually anything that relates to the future is the uncertainty. Just as you can’t be sure what kind of weather we will have in five years time, you can’t be sure what kind of investments will perform best in five years from now.

Of course, in the case of investments, you have all kinds of analyses, approaches, investment tools, and techniques that are supposed to tell you what’s going to happen in the future regarding the world economy and the asset prices, but all they can do is limit the uncertainty. None of these can ever wipe it out completely. Consequently there are no sure bets and any investment that you make will carry some risk. Some will be much riskier (futures or options speculation) than others (purchasing physical gold or silver). If you take all factors into account, there are no riskless assets. T-bills? Risk of inflation or a country’s default (many countries have defaulted in history, so it’s not impossible). Gold? Almost there – gold’s price will most likely never go to 0 (unlike all other – fiat – money, it never has.) But what about the situation in which an economic regime suppresses gold price for longer than an average investor’s life?

How do you make money and not lose it if you can’t know for sure what’s going to happen with various assets’ prices? You simply take risk into account and prepare your portfolio, so that:

  • You’ll be safe in as many future scenarios as possible, and
  • You’re able to eventually reap sizable profits whatever comes your way.

Of course you can’t prepare for each and every risk, but you’ll be surprised how many can be mitigated by following prudent portfolio structuring rules.

We believe that you would agree if we told you that if the 2 above goals are met, then your portfolio is well structured. In fact, one can call portfolio structuring simply the process of making sure that these goals are met.

So, let’s see if the separation of the capital into 3 parts (insurance, investment, and trading capital) helps us reach these goals under various scenarios. Generally, this is the very top layer of the portfolio and the diversification of strategies aims to deal with big changes in the investment environment. Consequently, we will focus on the big picture and differentiate between several major directions in which the current economic situation could evolve.

  • The bull market in the precious metals market continues normally – bigger corrections (say, over $300 in gold) are seen from time to time. In this case, the long-term investment capital should thrive as it focuses on limiting exposure during these corrections). The insurance part should grow as well (although not as much as the investment part as it would remain invested during corrections) and trading should provide some gains as well.
  • The bull market in the precious metals ends now – long-term investment capital should preserve value, as it would probably be moved out of the market once it became evident that the correction is not a minor thing, and trading capital should provide some gains. The insurance part would not be put out of the market during the decline (or at least not soon) so its value would decline, however the losses would be in a significant extent covered by gains from trading. This is not a perfect, unrealistic scenario in which you sell everything at the top; this is a down-to-earth, realistic case that prepares for this uncertainty. Please note that losing only some capital or not losing it at all (if trades go very well) in a precious metals portfolio if a bull market ends is a very good outcome. At some point you will most likely limit the insurance and long-term investment and increase the trading capital, which will allow you to make money on gold and silver even during bear markets.
  • The bull market accelerates and prices of gold and silver enter parabolic mania – in this case, the insurance part of the capital that remains invested outperforms both: long-term investment and trading, but all of them gain.
  • The financial system as we know it ceases to exist - the value of the insurance part of the capital goes through the roof, which makes up for any losses in the trading capital resulting from the annihilation of the trading vehicles that could have been used. The long-term investment capital will soar as well, given that it was invested at that time (which is very probable, as it is supposed to be out of the market only very temporarily).
  • Precious metals enter a prolonged multi-year consolidation – insurance and long-term capital should provide no, or moderate gains (thanks to rebalancing), but the trading capital should keep making you money.

As you see, you are covered in all cases thanks to diversification between strategies. No single approach provides you with that benefit. 

If you don’t put money into the insurance category – meaning if you don’t hold some physical gold and silver, then you might end up with nothing if the financial system collapses and various derivatives become worthless.

If you don’t put any money into the long-term investment category, but remember about insurance and trading parts, your portfolio will be covered against the extreme situations (both: end of the bull market on any given day and against buying frenzy that accompanies the parabolic rally – in this case being covered means not missing out on this opportunity). However, you would not do as well if the bull market continues normally – you would be hurt by big corrections, because it is the long-term investment capital that you take out of the market when these become very likely.

The preceding portfolio construction is based on something that is already widely accepted by financial professionals. A wise man said once that there are many paths to the top of the mountain, but when you get there, you can see only one sun. There are several approaches with which we started our research, but they always ended up in the form that we described above. Let's take a look:

  • The semi-active management approach – out of purely active management (in most cases this means trading), passive management (in most cases this means buy-and-hold investments) and semi-active management it is the latter that has the highest information ratio, that is the highest amount of active return per active risk. In other words, the collective experience of many financial professionals resulted in viewing the semi-active management as the one that allows the investor to reap the biggest gains through making changes to their portfolio relative to the risk that it involves.
  • The core-satellite approach – this is one of the ways to implement the semi-active management. It breaks down to dividing one’s capital into the part that is dedicated to passive and active management. The amount defined as core investments is simply the long-term investment (that you don’t really trade) and the satellite is the capital that is used for trading. The core-satellite approach is well-known and appreciated by the financial pros. You will find more information herehere, and here.
  • The concept of rebalancing – unless you periodically rebalance your portfolio, its structure will move away from your original setting because some parts will outperform others. At some point you may end up with a portfolio that doesn’t fit your risk preferences at all. For example, in a classic stocks-bonds portfolio one may starts with a 50/50 structure in a bull market in stocks but after a few years it could easily turn into 80/20, while at the same time the investor may become more risk averse as he or she moves closer to retirement. Analogous situations can be observed in other markets including the precious metals. 
  • Rebalancing is something that is at the same time both: a passive and active investment approach. It’s passive, because you generally don’t get out of the market, but hold a long-term investment position at all times. It’s active, because after all, you do regularly buy and sell various assets. The point is that rebalancing has been verified as essential tool in each investor’s strategy. Even traders who close their trades on an automatic profit-take order can be seen as those who implement rebalancing in this way. Consequently, since we know that the strategy that works right between active and passive investments is very effective and popular, then we may expect that an approach that also incorporates and combines both of them will be effective as well.
  • Position sizing research for precious metals trades – the optimal amount of capital to be used for each trade is usually quite small and using more than the optimal amount decreases profits in the long run even if one is correct about the market in most cases. The rest – meaning most of one’s capital could be used for less risky, long-term investment. The implication is that diversification between trading capital and the long-term investment is a good idea.
  • • Long-term investments – research on how much should be kept in cash – in case of the long-term investments it’s ok to use a lot of one’s capital, but not all of it – some powder should be kept dry. This “powder,” or money, can be used as speculative capital. The implication is – again – that diversification between trading capital and the long-term investment is a good idea.
  • The concept of diversification – simply by not putting all of your eggs into one basket will likely provide you with protection in case something bad happens to any single basket. Combining 3 approaches into one big strategy provides you with diversification at the highest layer of your portfolio. Sticking to the above analogy, you can think about diversification among strategies as using 3 sets of baskets instead of just one and putting each set in a different country, or even continent. This makes your eggs even safer.

We hope that by now we have convinced you that diversifying strategies is the way to go. Let’s now see how this can be achieved in a precious metals portfolio and how we can further diversify within strategies in order to keep the risk at acceptable levels. Of course, these levels are different for different investors, but we will get to that in just a minute.

Let’s examine different parts of the portfolio. We will start with the insurance part and its sub-parts, and then move to investments and its sub-parts and then we’ll move to the trading capital.

Insurance – this part of the precious metals portfolio can and in most cases should be further divided into physical gold and physical silver. Physical, because the whole point of having the insurance part in the first place, is to be protected against a severe financial turmoil that could possibly result in destroying the fiat currency system. If that took place, many derivative instruments would probably cease to exist, thus erasing any profits that one might have in them (say gold CFDs). The only sure bet would be tangible assets and most of all – gold and silver that are commonly known throughout history for their monetary usage.

We think that the more risk-averse you are, the more gold and less silver you should own. Generally, the factors that make one more risk-averse are: time horizon, which often translates into age (younger investors can take on more risk), liquidity requirement (if one can postpone drawing money from the portfolio, then they can take on more risk) and one’s individual preference (simply do not take on more risk than your comfort zone).

Investment – this part of the precious metals portfolio is usually further divided into metals and mining stocks. Mining stocks can outperform precious metals or can underperform. While switching from metals to miners and vice-versa can be a profitable trading (not investment) activity if done on a short-term basis, the true benefit that the mining stocks provide for long-term investors is diversification. By holding both: miners and metals, one can limit the variability of one’s portfolio with regard to the miners:metals ratio. In other words, miners’ out- and underperformance should average out in the long run and thanks to this, one will not miss out completely on outperformance of any sub-sector, that is precious metals or mining stocks.

Investment: Precious Metals – this part of your portfolio may not seem different at all from what you hold as insurance. The difference is that at times you can sell this part of your portfolio in order to benefit from highly probable medium-term declines. Before we decided to divide the long-term investments into insurance and investment, we used to write about selling most of one’s long-term holdings when the situation looked bearish (there were not many times that this took place, though) and the problem was that it wasn’t crystal clear how much one should sell. Now it’s clear – when a decline becomes very probable in the medium term, one should sell the investment part of the capital, but not the insurance part. The investment part of our suggested portfolio does not only include gold and silver, but also platinum. The latter can at times be greatly under- or overvalued relative to gold and silver, so including it in this part of the portfolio allows for increased diversification and also for greater profit potential thanks to moving in or out of the platinum during medium-term under- overvaluation cycles.

Investment: Mining Stocks – this part of the investment portfolio is dedicated to gold stocks and silver stocks. In this part of the portfolio we achieve diversification by including stocks related to both precious metals. However, the first breakdown of this section divides it into two groups: senior mining stocks and junior mining stocks. We don’t include platinum producers, because of their significant underperformance of the underlying metal in both up- and downswings. Platinum is preferred to platinum stocks right now.

Investment: Mining Stocks: Seniors – this part of the investment portfolio is dedicated to big, well-capitalized mining companies that produce gold and/or silver. We suggest choosing 3 to 5 gold stocks (depending how much your broker charges you per order) and 2 to 4 silver stocks. Which stocks should you choose? Those that have the highest exposure to gold or silver and highest leverage – those are the best gold stocks and best silver stocks. Please keep in mind that investing in the long run doesn’t mean that you should forget about your mining stocks when you purchase them. In fact, our research has shown that you can greatly improve your portfolio profitability by rebalancing your precious metals mining stocks (hint: rebalance gold stocks every 35 or 60 trading days and your silver stocks every 25 or 40 trading days).

If you can’t or don’t want to invest in individual mining stocks, you can also participate in this sector also in more indirect ways. The most popular are gold and silver ETFs and ETNs.

Those of you, who like a little more leverage, might want to purchase LEAPS (Long-term Equity Antici-Pation Securities) on these stocks. These are basically very long-term options (1-3 years to expiration), whose symbol does not begin with a stock symbol, but rather with letters such as W, V, and X. You should be able to purchase them in the way you purchase short-term options. We don’t recommend putting more than 20% of this part of your portfolio (that is investment: mining stocks: seniors) into these instruments.

Investment: Mining Stocks: Seniors: Gold Stocks – just as the name suggests, this is the part of the portfolio that is all about gold stocks.

Investment: Mining Stocks: Seniors: Silver Stocks – just as the name suggest, this is the part of the portfolio that is all about silver stocks.

Investment: Mining Stocks: Juniors – this part of the investment portfolio is dedicated to small, low-cap “junior” mining stocks that don’t produce gold or silver just yet, but they are either looking for them or developing their properties and preparing for production. Generally, junior stocks are more difficult to analyze than big seniors mining stocks, less liquid and more stocks need to be purchased to diversify away the company-specific risk. In fact, diversification is the most important thing to remember here. How many juniors you should own depends on the size of your portfolio and the commission your broker charges. If the fees are reasonable, we believe you should be able to find about 20 juniors. If the size of your portfolio implies limiting the number of juniors (because of high relative costs of your broker's commission), the appropriate thing to do is to limit the number of juniors in your portfolio, and to limit your overall exposure to the junior sector.

When selecting junior mining companies, apart from the fundamental factors, please focus on their relative performance regarding the whole junior sector (in most cases you can use the Canadian Toronto Stock Exchange Venture Index as a proxy for the sector). Generally, we do not advocate buying juniors that underperform the sector. How do we calculate the relative performance? Details depend on the situation and change over time, for example after a massive decline we focus on stocks whose rebound was sizeable.

Naturally, you can be fine with other junior companies (for example if you have subscribed to a newsletter with fundamental approach and you believe that stocks selected in that particular newsletter are superior to other juniors) as long as your portfolio is diversified. We strive to be realistic, and we know that many investors use more than one "support service and/or newsletter". Should that be the case, perhaps the way to go would be to purchase only those juniors that are both on our list and are recommended by our colleagues. Of course, the final call is up to you. You are most likely listening to this audiobook because you want to make money in the precious metals market and we provide you with what we believe is effective information; however, it is your decision how to use it.

Once again, the most important thing in the junior sector is diversification (this is the third time that we’ve mentioned diversification – perhaps we should even mention it four times). Sure, you can make a killing if you have one junior that is very successful but  long term the odds are against you. This is not how big money is made AND preserved in the long term.

If you can’t or don’t want to invest in individual junior mining stocks, you can participate in this sector in more indirect ways. The most popular is the GDXJ ETF.

If you like a little more leverage, might want to purchase warrants on some of your juniors. As referring to LEAPS (in case of the senior mining stocks), warrants are basically options on juniors. The main differences are that warrants have defined parameters (strike price and expiration date), and you must sell them prior to their expiration date. Again, we don’t recommend putting more than 20% of this part of your portfolio into these instruments.

Investment: Mining Stocks: Seniors: Gold Juniors – just as the name suggests, this is the part of the portfolio that is all about gold juniors. 

Investment: Mining Stocks: Seniors: Silver Juniors – just as the name suggests, this is the part of the portfolio that is all about silver juniors. 

Trading / Cash – this is the part of your portfolio that is not used for any long-term investments. On one hand, it is a cash balance (T-bills are preferred to cash as they offer at least some interest), while at the same time, this is the trading capital. It works both ways thanks to sound money management as we are using only a small part of this non-long-term-investment capital for each trade. Therefore, most of it will virtually always remain in cash in order to always keep dry powder to smoothly meet any sudden cash requirements, such as an exceptional long-term buying opportunity, or an urgent need to cover some personal expenses with money from one’s investment portfolio.

This part of the portfolio can (and quite often should) be further diversified. For instance, if you want to trade two or more markets or follow two or more sources of signals (types of premium publications, tools, techniques, approaches, or analysts), you can either:

  • In case of having more signals for the same market - enter a trade only if all sources are in tune, or at least mostly in tune – which means that you will open or close trades relatively rarely (which limits the profit potential). This would mean staying out of the market in many cases. It might limit the risk and influence profitability. If one decides to make up for the waiting with higher position sizes, the risk might actually increase though.
  • In case of having more signals for the same market, and in case of taking advantage of price moves in more than one market (i.e. trading more than gold - perhaps also crude oil, currencies, and stocks) you can divide your capital into parts and trade each of them separately (e.g. gold trading capital, oil trading capital, and so on). This approach would focus on limiting risk. With smaller capital allocations for each market, the amount dedicated to each trade would be proportionately lower. Say you have $50k of trading capital. You divide it into $10k for each of the 5 markets you want to trade. You might trade using the rule of maximum 2% loss per trade (a.k.a. 2% risk) and in this case it would be 2% of the $10k - $200 maximum loss per trade (but also a relatively small profit potential).
  • In case of having more signals for the same market, and in case of taking advantage of price moves in more than one market (i.e. trading more than gold - perhaps also crude oil, currencies, and stocks) you can view your entire trading capital as one and allow signals for different markets to overlap each other. This approach would focus on boosting potential profits. Say you have $50k of trading capital. You might trade it using the maximum 2% loss per trade (regardless of the market) and in this case it would be 2% of the $50k - $1000 maximum loss per trade (but also a relatively big profit potential).

The last two approaches seem to be better than the first one, because they provide more trades overall and if the strategies used are sound and the analysts or other sources of signals are reliable, the odds are that the more trades we get, the better the results.

There is a certain trade-off between the last two - either limiting risk or boosting profits. If only there was a way to combine the best of both worlds…

Oh wait, there is. And it’s really simple.

One way to limit risk is to limit the amount of capital that is being used, but the other way to do it is through diversification. The latter means that while there might be trades that cause losses, at the same time, or shortly, there might also be trades from other markets that more than make up for the earlier hits. E.g. two losing trades and four - equally big trades mean overall profits. At the same time, the first - cautious - approach would probably imply no profits as no trades might be made at all during this time.

The second approach utilizes the diversification potential to a greater extent as more capital is being used in general. Consequently, this is the base strategy that we will now work with further.

We’ll tweak it with regard to risk. It simply means adjusting the amount of capital that is being used. One can use the final approach, but simply reduce the maximum risk from 2% to 1% or for example 1.6%. This very simple technique let’s you keep the risk in check, while at the same time aim to benefit from diversification and increased profit potential.

The more sources of signals (for instance Gold & Silver Trading Alerts along with Oil Trading Alerts, and Stock Trading Alerts) one adds to the mix, the greater the benefit from diversification will be, as long as the trades are unrelated (or at least mostly unrelated) to each other. This means greater potential profitability.

At the moment of updating this report (September 2021), we - Sunshine Profits - have the following sources of signals for you:

  • The analysis of gold, silver, and mining stocks by Przemyslaw Radomski, CFA (PR) in the form of Gold & Silver Trading Alerts
  • The analysis of crude oil by Sebastien Bischeri in the form of Oil Trading Alerts
  • The analysis of the stock market by Paul Rejczak in the form of Stock Trading Alerts

We additionally provide direct signals from Sunshine Profits’ proprietary precious metals indicators that focus on opportunities to go long gold, silver, and mining stocks - these signals are available for free. Moreover, the True Seasonal charts (also available for free) may be viewed as helpful trading tools, but we don’t view them as such as they don’t provide specific buy or sell signals.

Position Sizes

The above signals are not created equal, as the trades featured in the Trading Alerts and Day Trading Signals are based on different time-frames. The 2% (max risk) rule with regard to trading capital is usually applied to very short-term trades, so it fits the Day Trading Signals the most. The Trading Alerts sometimes feature trades that extent into weeks or even months. Consequently, they are somewhat close to the investment type of capital even though they are technically about speculative trades.

This means that it might be better to base the size of the Trading Alert trades on your investment plus trading capital. In this way, such trades will be bigger, while the short-term trades based on the Day Trading Signals will be more frequent, but smaller. Of course, this doesn’t have to bring about an increase in total risk, because the percentage of capital dedicated to each trade can be lowered (say to the level that takes risk to or below 1%). The only thing that changes are the sizes of the trades relative to each other.

In practice, it means that if there was a position in Gold & Silver Trading Alerts that has a relatively far away stop-loss order, the potential loss on the position is significant and thus the number of shares in mining stocks or ETFs or in a similar trading vehicle, would be smaller. If the stop-loss order for a trade on Oil Trading Alerts was close to the current crude oil price, then the potential loss would be smaller in price terms, so the number of shares in ETFs or similar trading vehicles would be bigger. The point would be to match the pre-determined level of exposure (risk) to this type of signal. Say $2000 is the maximum risk and based on the distant stop-loss, a given ETF could lose $5. In this case, the number of stocks to purchase would be 400. But if the stop-loss was just $0.40 away, one could purchase 5000 shares. The maximum risk in dollar terms would be the same.

This also means that if you choose to use a leveraged ETF, you will need to purchase fewer shares than if you bought the unleveraged one (if their nominal price is similar, that is).

All in all, what matters is what is a given trade’s risk in dollar terms. Once you know that, compare it to you max risk level for a given market based on the trade’s stop-loss order. If the risk associated with the position is greater than the max risk level, you’d need to decrease the size of the trade.

How to determine the optimal percentage for one trade? The 2% is generally (based on multiple research studies) viewed as the maximum of the levels that can be viewed as safe in the long run (if the trading signals are based on thorough research, that is). 2.5% might already be an overkill even in case of a very good trading system. So, it’s better to decrease this amount based on one’s risk tolerance. If it is high, then the 2% might stay intact. But, if it’s lower (and in most cases it is lower), you can take it to 1% or even less. There’s no major penalty (perhaps only some minimal brokerage fees) for using too little capital, but too much can hurt you even if the trading methodology is well and sound. In particular, beginning investors and traders should start with numbers below 1%, perhaps even as little as 0.5% or lower. Assuming that one is dedicated to learning more about trading and investing, one idea would be to start with 0.1% and add 0.1% each week until moving to 1%, then adding 0.1% every month until reaching 2%.

Again, that’s 2% of what?

In case of the Day Trading Signals, it’s the percentage of the trading capital.

In case of the Trading Alerts, it’s the percentage of the sum of trading capital and investment capital.

This way, those of only the investing mindset won’t dedicate anything to day trading. Conversely, those exceptionally trading-oriented will treat the day trading and non-day trading the same. This is because in this case, there are no long-term investments, and the investment capital equals zero. Consequently, all capital is the trading capital dedicated to both timeframes (the short-term day trading and the non-day trading).

The below sample portfolios might be helpful as well. In short, Eric is the beginning investor, John is the trader, and prof. Jill is the long-term investor.

Predefined Portfolios

Thank you for your patience and congratulations for getting to this part of this lengthy piece of analysis. All of this may seem quite complicated, but as you will see in just a few moments, it really isn’t. The complicated parts are the methodology and the reasoning backing it up. We believe it is important that you know and agree with the foundation of what we suggest as a structure for your portfolio, because thanks to education about your gold and silver portfolio, it becomes much more stable and we hope, much more profitable. The best thing is that implementation of the portfolio structure we suggest – which is what you are probably most interested in – is relatively easy.

In fact, you can put all of the above on a graph that will illustrate how much money should be put into what part given that one agrees with the above approach. 

We have prepared three portfolios for you. 

The first predefined portfolio is called “Eric’s portfolio”. Eric is a guy who wants to make a killing in gold and get out, but something tells him it isn't a walk in the park. Unsure what “portfolio” means, he assumes it refers to all of his holdings and at times draws money from them to finance his spending needs. His friend, Professor Jill has suggested that he should go more slowly and become more familiar with precious metals before he ends up with his pockets inside out. Eric's portfolio is for someone relatively new to investments.

This is the kind of portfolio that would suit Eric given that he has $100,000 at his disposal.

Gold Portfolio Structure - Eric's portfolio

Here’s what kind of portfolio would suit Eric. A conservative one. He’s not experienced enough to afford more risky moves. There will be plenty of time to do that once he’s more experienced. At first, his portfolio should focus on the insurance and investment parts- say, by putting 45% of his portfolio in each of them. Some money dedicated to trading – about 12% in this case.

Eric would be better off putting more money into metals than into miners and preferring gold over silver – both are conservative choices.

The second predefined portfolio is called “John’s portfolio”. John can handle a lot of volatility ($50 intraday drop in gold? no biggie) and he is focused on short-term rides. His portfolio is relatively large and only contains capital he can afford to lose. If that capital was lost, he would certainly be disappointed, but he doesn't need that money to pay his bills anyway. John’s portfolio is for someone who knows how the precious metals market works.

This is the kind of portfolio that would suit John given that he has $100,000 at his disposal.

Gold Portfolio Structure - John's portfolio

Here’s what kind of portfolio would suit John. An aggressive one. Since John would be interested primarily in trading, his trading part of the portfolio is the biggest one – approximately 50%. Investment takes up about 30% and insurance takes about 20%. In a way, John is exactly the opposite of Eric. John as an experienced trader, can enter huge trades and afford more losses per trade, if things go in the unfavorable way. Conversely to Eric, John’s portfolio leans toward mining stocks instead of metals and silver is preferred over gold.

The third predefined portfolio is called “Professor Jill’s portfolio”. Professor Jill doesn’t really care about short-term market movements, which she views as meaningless noise. Her risk tolerance is average - she accepts some risk in her investments. Her focus is on the long-term fundamental picture and being positioned for it. A small part of her portfolio is in cash, used for spending needs and for taking advantage of extraordinary market environments. Professor Jill’s portfolio is for long-term investors.

Gold Portfolio Structure - Jill's Portfolio

Here’s what kind of portfolio would suit Professor Jill. A moderate one. In Professor Jill’s case the investment part of the portfolio is slightly more important than the insurance part and the trading part comes last. The approximate percentages are 40% for investments, 35% for insurance and 25% for trading. Professor Jill’s maximum risk per trading positions is 1% of the appropriate capita. Her portfolio is balanced between gold and silver and the same can be said about metals and mining stocks.

The more similar your own investment profile is to each of these sample portfolios, the more similar your portfolio can be. Naturally, there are many more factors that you should take into account when creating your portfolio and even though what you find on should help you create it, consultation with an investment advisor is still recommended.


Although reading this long report was probably not an easy thing to do without a cup (or two) of your favorite coffee, you can rest assured that it was worth it. According to most studies, the structure of one’s portfolio is responsible for at least 75% of the investment success in the long term. This means that even if your market timing skills are brilliant, you may still lose money on the long-term if you don’t pay enough attention to portfolio structuring.

In this report we showed you how to structure your portfolio so that it:

  • Limits risk,
  • Provides significant upside potential and exposure to the great bull market in silver and gold,
  • And takes into account key major factors that could come into play in the following years like a collapse of financial system, lack thereof, stable continuation of the bull market and a prolonged consolidation.

Additionally, you learned more about diversification and how it can be utilized on different levels of your portfolio. You also learned the advantages of semi-active portfolio management.

Finally, we discussed in detail how to combine signals from investment tools and analysts and provided 3 sample portfolio structures for 3 different types of investors.

We encourage you to apply the rules outlined above to your own portfolio at least partly. Please keep in mind that the more you care about your capital, the more it will be able to care for you and your goals when it is needed.

At Sunshine Profits, we'll keep helping you grow your portfolio more predictably.

Przemyslaw K. Radomski, CFA
Founder, Editor-in-chief