If I Had A Million Dollars, Where Would I Invest?

by JDH on July 30, 2011

On Tuesday night I had dinner in Toronto with “The Boys Club”. When I graduated from university almost 25 years ago I started work at a big company (that shall remain nameless) with nine other raw recruits. In my year there were six females and four males. We four males became known as “The Boys Club”, and although none of us have worked for that firm for many years, we all still stay in touch. Once or twice a year we get together for dinner, and that’s what we did on Tuesday.

We started talking about investments, as we often do, and one of the Boys asked a great question, to which I did not have an immediate answer. The question was:

If you had $1 million, and you could only invest it in one thing, what would you invest it in?

Interesting question.

My initial response was that the correct and prudent answer would be to invest it in a basket of junior and senior precious metals stocks, and perhaps some physical gold and silver, to take advantage of the continued increase in precious metals, while diversifying risk. Alas, that doesn’t answer the question, because a diversified basket is more than “one thing”.

(My thoughts on diversification are well known. For a hint, read my post on Diversification is over-rated, and at times diversification is stupid).

Perhaps the hypothetical million dollars should be invested in real estate? Perhaps real estate outside of North America?

Or perhaps you pick one gold or silver stock and roll the dice?

It’s an interesting question, and if you have an answer, feel free to post your thoughts in the comments section below, or over on the Buy High Sell Higher Forum.

I spent two days thinking further about the answer. I decided that, if I could only pick one “thing” to invest it over the next few years, it would be gold. With the massive amount of money printing going on it’s essential to preserve wealth, so investing in something that can’t be printed makes sense. But buying 600 ounces of gold and burying it in my backyard seems silly. Storing that amount of physical gold is somewhat dangerous, but there’s also no leverage.

Buying a precious metals mutual fund is an option, but which one? And do I really want to pay administration fees?

I want an investment that’s gold related, has relatively low risk, but high upside and leverage, but that isn’t physical gold or a mutual fund. My pick?:

FNV.TO – Franco-Nevada Corp.

Franco-Nevada has great management, is highly levered to the price of gold, but has diversification through it’s numerous different properties in different countries. I wrote extensively about it on Thursday, and yes, after I posted that piece I did start buying, and on dips I’ll buy more. Here’s that post:

Franco-Nevada Corp – Time to Buy?

I’m pleased to report that Franco-Nevada was up after I started buying on Thursday, and again on Friday, so so far, so good. On further weakness, I’ll buy more.

Speaking of gold and diversification, the problem with putting all of your eggs in one basket is that the basket can get crushed, as happened with AEM.TO – Agnico-Eagle Mines Ltd. this week, on disappointing results:

Agnico-Eagle closed Friday at $53.19, and it hasn’t been that low since April 27, 2009. You remember April, 2009? That’s when gold was under $1,000 per ounce. Gold is up over 60% since then, and Agnico-Eagle hasn’t budged. The company has some minor problems (foreign currency translation loss, cash mining costs somewhat high; you can read about them in their quarterly report), but this strikes me as a huge over-reaction.

The Canadian markets are closed on Monday for a Civic Holiday in Ontario; I plan to start buying on Tuesday if the price remains in this range or lower.


As for my question: Mortgage: Pay it off now, or later? from two weeks ago, thanks for your comments, I paid off the mortgage this week.

(Which of course is not to say that if some great opportunities present themselves in the next few months I won’t activate a line of credit to access cash, but that’s not the plan at this point).

In the end, I decided that no debt makes it easy to sleep at night, so that’s what I’m doing.

As we await the temporary resolution of the budget mess in the U.S., we are probably in for a volatile week, so I will start buying on dips, and otherwise enjoy the good weather of our long weekend.

Thanks for reading; see you next week.

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