New Llamafolio Purchase
Just seconds ago, I made two separate but related Llamafolio purchases. In case you haven’t been watching, all the precious metals have been taking a beating over the last few days. This is mainly due to the strength of the US dollar, at least on somebody’s fancy charts. I believe this to a false flag, and a situation that will reverse itself in short order. So, what did I purchase?
- 15 shares of DGP @ 19.12 per share
- 14 shares of SLV @ 15.30 per share
A little background is in order, no doubt. SLV is the Silver ETF – electronically traded fund. Barclays supposedly holds an ounce of silver for every share of SLV on the market. So, the share price of SLV is usually very close to the spot price for an ounce of silver. Since I believe Silver to be undervalued, I am comfortable paying $15.30 per share for this ETF. I don’t intend to hold a long position here, but rather a short-medium term position for a short capital gain. With any proceeds, I’ll likely buy some Silver Eagles or US Junk silver. I won’t make a fortune here by any means, but it looks to be a solid investment.
DGP works a little differently
DGP is another beast entirely. There is a gold ETF -GLD, that acts in much the same way as the silver ETF. The only difference is that each GLD share is 1/10 ounce of gold. DGP doesn’t work quite the same way. Rather, it’s a derivative investment. That’s something I’ve never dabbled in before, and wouldn’t commit any large sum of money to. Here’s why:
For every percentage move that Gold makes, DGP doubles that move. I.E. if gold rises by 3% one day, DGP goes up 6%. By the same token, if Gold drops by 5%, DGP falls by 10%. This ETF magnifies gold’s moves by a factor of 2. That means twice the risk, with the potential for twice the reward. Since I feel gold will make a march toward $1000 again very soon, I feel this is also a smart choice. Riskier than GLD for sure, but I don’t have any reservations about making that bet. Like my SLV purchase, I don’t intend to hold DGP long-term. A few months at most is my timeframe here.
Trading is new to me
I haven’t before ventured into the world of trading stocks / ETF’s / ETN’s. This is a first for me, and an experiment. I did commit $500 to this experiment, which isn’t a pittance, but it also won’t take me to the poorhouse if it fails. Keep your eyes peeled for my results.
August 8th, 2008 at 6:12 pm
I think you are wise to commit a level of money that you care about, but that will not lead to your demise if you were to lose it… buying and selling shares takes time to learn, and there is no insurance to back up investments, but if you handle it intelligently it can be a great thing. Much success to you!
Jerry
August 30th, 2008 at 10:20 am
I like to “put my money where my mouth is” when it comes to investments – talking something up without investing is fruitless. I’m not willing to bet the farm though, so my output isn’t in the thousands on this one.
September 17th, 2008 at 5:06 pm
[...] – stocks were down, while metals skyrocketed. Last month I made a seemingly risky purchase of DGP – a Gold price based derivative. The goal of this ETN is to double the daily movement of [...]