In our last post we made the case that most people should own some silver.

And that fits with most financial advisor’s recommendation’s that people own some precious metals in their investment portfolio.  But just how much in precious metals, and silver, should you own?

Opinions vary rather widely on this, so let’s look into it and narrow down the choices.

One advisor, who is very concerned about the risk to currencies right now, feels that 33% of a portfolio should be in precious metals.  And he would have most of that 33% in gold (70-80%) and a smaller part of it in silver (20-30%).

So that would be around 10% of a total portfolio in silver and 23% in gold for a total of 33% in precious metals.  (Note I used his high end of 30% silver of 33% precious metals =.099% rounded = 10%).

So in a $100,000 portfolio, based on his recommendation, you would have $10,000 in silver and $23,000 in gold, with the remaining $67,000 in stocks and other investments.

That feels a quite a bit extreme to me.  True, if the currency collapsed or there was a serious financial crisis, that would be a good place to be.  But we can’t make all of our financial decisions based on some slim possibility of disaster.  After all, life tends to go on, day by day, pretty much the same.

So we want to invest accordingly, while still affording some protection against disaster and preserving our purchasing power.  And also being prepared to make a good deal of money if the price of silver does rocket higher in the future.

So let’s look at another opinion.  This one, from a very credible expert, is based on an actual study.  It showed that the best mix for conservative, average and aggressive investors to be 7.1%, 12.5% and 15.7% in precious metals.  These percent’s gave the best financial results for those groups of investors.

Now this study included gold, silver and platinum as the precious metals.  So using silver as a third of those precious metals, we could say the silver recommended to be 2.3% for conservative investors, 4.1% for average and 5.2% for aggressive investors.  And since none of this is an exact science, let’s just smooth those numbers out to 2%, 4% and 6% respectfully as an easy guideline.

That seems more balanced and realistic to me.  And, like I said, it was based on a study to maximize investor return.

Then in another report from another very credible source, they initially recommended no more than 10% in silver, but then in a later update raised that to a maximum of 25% in silver.

And yet another advisor felt that people should own more silver than gold, and recommended that 60-70% of their precious metals investments should be in silver.  So using the earlier study, we could say the silver recommended to be 5% for conservative, 9% for average and 11% for aggressive investors.

And finally, in another credible portfolio allocation book, the author recommends 5% of a total portfolio be in precious metals.  So we could say 2.5% in silver.

Wow – so that’s a pretty wide range of opinions, with 2.3% on the low end and 25% on the high end.

But all that said, I think it’s best not to go too overboard with all of this.  Because silver can go up and down pretty rapidly.

So while there’s a good case for owning it, and anticipating its price to soar sometime in the future, no one knows when that is.  And it could go down before going up.  And that could cause some pretty big swings in your portfolio if you are too heavily invested.

So to be prudent and keep it simple, I would tend to use the aforementioned study as a starting point.  That is, the simple guideline of 2% silver for a conservative investor, 4% for an average investor and 6% for aggressive investors.

As of this writing I have 8% in precious metals overall (6% silver and 2% gold).  And I intend to move that up over time to 10% precious metals (7% silver and 3% gold).

So I am somewhat of an aggressive precious metals investor based on the 2% conservative investor, 4% average investor, and 6% aggressive investor guideline numbers above.  And that’s because I do believe silver will make a big move sometime in the future, and gives me some financial protection over the long run.  So I do eat my own cooking, so to speak.

But note that I haven’t gone totally crazy with this (like the 25% recommendation from one expert in the field).  I keep much more of my investments in stocks than precious metals, and particularly in dividend paying stocks.

Of course, everyone’s situation is different.  So you’ll need to decide for what works best for you.  But I think the 2%, 4%, 6% guideline above is a good place to start with your decision.  And most people should have at least 2% of their total portfolio in silver.

And that’s not too hard to do if you gradually accumulate silver over time.

To your health and prosperity – John