Investing isn’t always about just buying. When the time comes, or when it becomes necessary, having a good exit strategy is critical. Here’s an example…
by Matt Orloff
There will come a time perhaps soon, perhaps not that soon when it will come time to sell out of our silver positions.
Over the past 18 years Silver has ranged in price from as low as $4.00 an ounce to as high as $50 an ounce. It has spent probably about 70% of that time at a price less than $20/ounce including most of the last 4 years. It would not be inconceivable assuming you had a decent income, dollar cost averaged down on the dips, and lived a minimalist lifestyle to have accumulated 10000 ounces.
Wishing for it to go to the moon and speculating about the price in the next six months we’ve come to learn is really a waste of time, but having patience as well as a disciplined and logical thought out exit strategy is something worth while.
First, you need to outline your priorities. Are you looking to become wealthy? Are you preparing for SHTF barterability? Or perhaps looking to just net a cool couple hundred thousand bucks?
Then there is one of those elephant in the room types of questions – Will we get a bull market where the dollar will actually have purchasing power afterwards as well as a functioning society or will silver be rising into a global Mad Max Scenario?
Personally, I would like to hedge my bets to be able to become Financially Independent (have enough money or passive income to theoretically not have to rely on an employer for income) and have wealth insurance. Below is a potential strategy to achieve both of these objectives.
For our scenario I would like to use the example of having acquired 10,000 ounces at a dollar cost average of $20/ounce for a total of $200k invested.
The first four thousand ounces should probably be in SLV. (Yes, I know if you don’t hold it, you don’t own it) You would sell at approximately $50/ounce. This accomplishes two objectives. First, you offload the portion with the most counter party risk first. Second, in our scenario this also returns to you the exact amount of capital you invested so the rest of your position is pure profit and in your hands. Additionally, both of the last two bull markets were halted at this nominal level making it an ideal time to take profit off of the table.
The next three thousand ounces should probably be in 1000 ounce bars stored either in a secure vault or in a secure private location depending on whether you want to pay storage fees or not. Ideally this would be sold off to buy a house, car, and pay off any other debt you may have. The price target for this may be around the $100/ounce level or 2000 ounce/median home price ratio.
The next two thousand ounces should probably also be in 1000 ounce bars stored NOT in a vault and in either your residence or a private location secretly. Ideally this would be traded for additional real estate or Gold at a ratio of 20:1 and perhaps the $150/ounce price level (1980 inflation adjusted high).
An ideal assortment of your remaining one thousand ounces could be in four hundred ounce bars, thirty ten ounce bars, two hundred one ounce rounds, and one hundred ounces in 90% junk silver. These again would be sold off in descending order as prices rise to astronomical levels with keeping at a minimum your one ounce rounds and 90% junk silver for a SHTF scenario.
The basic framework of this strategy ensures several things. First it allows an easy offload via SLV to get you quickly into fiat profit. Second, it hedges against being screwed over by keeping the rest of your position whether silver or not in other physical assets. Third, should society cease to function in its current form you will not be without a decent amount of Gold for reset wealth preservation and smaller denominations of silver for bartering to get through.
On a final note, this is by no means an end all be all, silver may rise to $49 then drop down or it may be reset over a weekend to triple digits with no chance to properly execute any researched trades. You should be monitoring a variety of indicators including but not limited to Gold to Silver Ratio, Real Estate Prices, Oil Prices, Domestic or International Conflicts either ensuing or about to ensue, Stock Indices, the Dollar Index, Crypto Currencies, Fed Interest Rates, Bond Yields, COTs and many others. But either way it is safe to say having a well thought out plan of what to do when the time comes is necessary.
Whats your plan?