- building a passive long-term portfolio, i.e. getting positioned with stocks that you think have the greatest potential for big returns and then waiting.
- building an actively managed intermediate portfolio of stocks you think will out-perform in the ensuing year, i.e. selecting stocks you think will likely be winners based on strong fundamentals and technical analysis and then actively managing those picks to ensure they are winners. This means constant re-balancing and trading, and limiting your losses.
- trading stocks with momentum (daily, weekly, monthly) in an attempt to generate big returns in a short period of time.
Strategy #1: The Long-term Passive Approach
This strategy is a positioning approach based on the premise that gold, silver and cannabis stock prices are going to explode in value at some point in the future – it is not if, but when – and then sitting back and waiting for that inevitable explosion to happen. The focus of this strategy is to constantly build (position) the portfolio so it’s ready for the big move up and then to steadily sell shares and take profits on the way up.
The beauty of this strategy is that it ignores the major volatility associated with gold and silver mining stocks and particularly that of cannabis stocks. As a buy and hold strategy it is dependent on waiting for the big move up only selling a stock if the fundamentals have changed since you bought it. This approach will potentially create large paper losses for stocks that fall in value, but the strategy remains in place – waiting.
This strategy is all about positioning and waiting. You want to have positions in as many quality miners as you can and those positions should be chosen carefully. What you are not trying to do is re-balance your portfolio by trading. If a stock takes off, you let it ride, or even add to it, and, if a stock drops, you ignore it unless the story changed.
Strategy #2: The Intermediate (Annual Returns) Active Approach
Because gold/silver mining stocks and cannabis stocks are highly volatile, it is not unusual for portfolios to be down 50% or more – the cannabis market was down 54% at the end of October versus its peak back in March/April, for example – so if you have difficulty with paper losses, then you will likely want to use a more active approach. Strategy #2 is all about picking winners and then actively managing those picks to ensure they are winners.
Most active gold/silver and cannabis investors use an active strategy of managing their portfolio and limiting their losses. They are looking for annual returns and tend to cut losers that can impact those returns by either using automatic trading stops or keeping a constant vigil over the performance of each stock. They are constantly selling a few shares here and buying a few shares there to increase their returns.
A good active investor should always outperform a passive investor. However, to be an active investor requires the skill of picking winners – it is very difficult to pick 10 or 20 stocks and get it 100% right and virtually impossible to know which ones will be the big winners – plus the emotional makeup that allows you to constantly trade your portfolio. You have to be nimble and ready to trade on a moment’s notice.
Strategy #3: The Momentum/Speculate Short-term Approach
This final strategy is for big returns in a short period of time – a single day, a week, a month, or perhaps a bit longer. Chasing momentum is a smart way to invest if you know how to read technical charts to help you pick your spots well and use a trailing stop to lock-in gains or prevent big losses.
In addition to momentum trading, there is speculating, i.e., liking the story of a company. Speculation bets are for quick returns of less than one year. For example, if a stock is oversold, you can bet it is going to rebound, or, if a stock seems undervalued and is likely to rise in the near-term, you can trade it for a quick return.