By Mark Yaxley, General Manager for Strategic Wealth Preservation, Cayman Islands
Admittedly, Las Vegas is not my favorite place in the world. There are many other cities where I’d rather spend my free time. But out of necessity, I do find myself there fairly regularly, and if nothing else, Sin City has provided me with two very valuable life lessons, which can be applied to either gambling or investing in precious metals.
Lesson #1 - If you want to make any profits when gambling or investing, you have to know when to take money off the table.
Lesson #2 – It’s very wise to have an exit strategy in mind before you start gambling or investing, and when that target is reached, you walk away from the table, no matter how tempting it is to keep playing.
Think of Blackjack as a Marketplace
When you take a seat at a blackjack table and lay your money down to play, you’ve effectively entered a small marketplace. Within this marketplace, you are joined by other players (i.e. market participants) and by the dealer (i.e. the market maker).
The dealer keeps busy shuffling cards, dealing you hands, some good, some bad, taking your money when you lose and paying you out when you win. The other market participants, like you, wager money on their hands, while executing their own personal strategies by picking up extra cards, staying put or doubling down when the timing seems right.
In effect, the blackjack table works a lot like an investment marketplace; you are wagering money on a set of variables in the hopes that your strategy will eventually lead you to profits (or at least a few free drinks along the way).
Start with A Strategy
After many hours sitting around the blackjack table, observing my own successes and failures, as well as those of other players, I realized the only way to earn a profit at blackjack, much like investing in precious metals, was either a) by being extremely lucky or b) by having a plan before starting to play.
I noticed that time and time again, when players either sat down without a plan, didn’t understand the rules to begin with or got caught up in the euphoria of the game itself, they inevitably lost, walking away from the table disappointed and empty handed.
The strategy I developed for playing blackjack is very similar to my investment strategy for precious metals:
#1 - I enter the game with a clear target in mind and will walk away immediately once the target is reached.
#2 - I systematically remove money from the table as I earn profits throughout the course of playing the game.
For illustration purposes, let me give you a very simple example;
Let’s say I have $200 dollars to invest at the beginning of the game. The first thing I need to do is decide what my target is for this playing session. Let’s say for the sake of argument I set my target at $300, a $100-dollar profit or 50% return on my original investment (not a bad take for a few hours work).
Secondly, and perhaps more importantly, I systematically remove money from the table as I earn profits throughout the course of playing the game, paying myself out in micro-increments as I win hands. Let’s say I bet $10 dollars on the first hand, and I win. I physically take that $10 chip off the table and put it in my pocket. I’m now back to my original $200 investment on the table with an extra $10 in my pocket.
I continue using this strategy over the course of several hours or until I have reached my original target of $300. Once I reach $300, I’m picking up my chips and heading for the pool, regardless of how much fun I’m having or how cute the blond sitting next to me is.
Applying This Strategy to Precious Metals Investing
Obviously, the strategy as it applies to precious metals investing is more complex than a friendly game of blackjack at the Bellagio. The above example is intended to illustrate the fact that it is very important to take profits when given the opportunity to do so. Remember, it never hurts to take profits off the table, even if there is an opportunity for further gain (so long as money is on the table, there is also an opportunity for loss). Cashing in profits, when they become available, is a smart and wise decision. The money earned can always be played later or reinvested into another opportunity all together.
For example, as it relates to gold and silver investing, the metals have been on a healthy run as of late. Gold is up 20% so far this year and silver over 30%. That has created plenty of opportunity for investors who bought precious metals at lower spot prices between 2014 and 2018 to take some money off the table.
Personally, on August 30th I sold 20% of my silver holdings at $18.38/oz. Although I was fairly confident at the time that the price of silver would continue rising (as reflected by my decision to keep 80% of my silver ‘in the game’), taking a few dollars profit per oz was a healthy and wise decision. I slept well that night.
As per having a target price in mind to sell all of my silver holdings at, it’s a very personal number, but more importantly, I do have an exit price in mind. Too often, I see precious metal investors waiting for new record highs or frankly unrealistic numbers to be achieved before they will take any profits at all. They are doing themselves a disservice.
For example, if you believe that gold will trade at $10,000/oz, and therefor do not sell any ounces as the price ticks upwards past $2000/oz, $3000/oz, $5000/oz and onwards, you may be in for a big disappointment. If the price retracks sharply or settles into a new range anywhere between the current price and $10,000/oz, you will have missed numerous occasions to lock in healthy gains along the way.
Do yourself a favor, have an exit price in mind and never regret locking in profits. For advanced training on this subject matter, I recommend a 3-night stay at the Bellagio in Las Vegas. Just watch the tables.
Mark Yaxley is the General Manager for Strategic Wealth Preservation, a fully-integrated precious metals dealer and global storage provider. Following the completion of his studies at McGill University, Mark joined world-renowned Kitco Metals in 2006, serving as their Product Development Manager and Product Marketing Manager until 2013. Mark joined Strategic Wealth Preservation in 2014 as their Head of Operations and now serves as the General Manager, focusing on the diverse needs of SWP’s high-net-worth and commercial clients.