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Gallium Portfolio Allocation - Sizing Your Position

Investing

Appropriate portfolio sizing protects your overall investment returns while providing meaningful gallium exposure. This guide helps you right-size your gallium investment.

Portfolio Allocation Framework

Conservative Allocation (1-3% of Portfolio)

Best for: First-time commodity investors, lower risk tolerance, retirees

Characteristics:

  • Limited downside impact on overall portfolio
  • Testing thesis with minimal capital
  • Lower absolute dollar amount typically
  • Reduced stress and monitoring requirements
  • Appropriate for undecided investors

Moderate Allocation (3-5% of Portfolio)

Best for: Experienced alternatives investors, moderate risk tolerance

Characteristics:

  • Meaningful but not dominant position
  • Sufficient to participate in upside
  • Manageable downside impact (5-10% portfolio drawdown if 50% loss)
  • Appropriate for committed thesis
  • Standard allocation for conviction positions

Aggressive Allocation (5-10% of Portfolio)

Best for: Experienced commodity investors, higher risk tolerance, commodities experts

Characteristics:

  • Significant portfolio position
  • Major return driver if thesis plays out
  • 50% loss would significantly impact portfolio (2.5-5% portfolio decline)
  • Requires high conviction and expertise
  • Only for disciplined investors

Maximum Allocation (10% of Portfolio)

  • Absolute maximum for most investors
  • Only for experienced, capitalized investors
  • Requires clear thesis and risk management
  • Beyond 10% creates concentration risk

Determining Your Allocation

Step 1: Assess Risk Tolerance

  • How comfortable are you with 30%+ volatility?
  • Could you hold through 50% drawdown?
  • 5-10 year commitment required?
  • Emotional discipline for patience?
  • Other portfolio impacts acceptable?

Step 2: Calculate Dollar Amount

Formula: Portfolio Value × Target Allocation % = Gallium Investment

Examples:

  • $500,000 portfolio × 3% = $15,000 gallium
  • $1,000,000 portfolio × 5% = $50,000 gallium
  • $2,000,000 portfolio × 2% = $40,000 gallium

Step 3: Verify Capital Availability

  • Capital not needed for 5-10 years?
  • Adequate emergency reserves separately?
  • No competing capital needs?
  • Comfortable with capital tied up?

Step 4: Assess Expertise

  • Understand gallium fundamentals?
  • Comfortable with commodity investing?
  • Research capacity for monitoring?
  • Access to storage/insurance?
  • Time for ongoing management?

Position Structure

Layered Approach (Recommended)

Build position gradually over time:

Year 1: 33% of target ($10,000 of $30,000 target)

  • Initial position
  • Test execution and storage
  • Verify thesis conviction

Year 2: Additional 33% ($10,000)

  • Verify ongoing thesis
  • Test market conditions
  • Increase confidence

Year 3: Final 33% ($10,000)

  • Complete position building
  • Full commitment to thesis
  • Ready for 5-7 year hold

Benefits:

  • Reduces timing risk
  • Tests execution approach
  • Builds conviction
  • Averages entry price
  • Reduces pressure

Single Purchase Approach (Simpler)

  • Make full allocation in single transaction
  • Simpler execution and tracking
  • More timing risk
  • Faster full position establishment

Rebalancing Strategy

When to Rebalance

If gallium appreciates significantly:

  • 15%+ above target allocation: Consider trimming
  • 20%+ above target: Reduce to maintain discipline
  • Prevents concentration from growing

If gallium declines significantly:

  • 20%+ below target allocation: Consider adding
  • 30%+ below target: Evaluate for purchase
  • Maintains conviction positioning

Rebalancing Discipline

  • Set calendar reminders (quarterly check)
  • Document rebalancing rationale
  • Maintain predetermined target %
  • Resist emotional rebalancing
  • Stay focused on thesis

Physical vs. Equity Allocation Split

Pure Physical Gallium

  • 100% direct metal ownership
  • Maximum control and liquidity challenges
  • Highest storage/insurance costs
  • Best for long-term storage investors

Equity Exposure Mix

  • 30-50% physical gallium metal
  • 50-70% related equities (producers, users)
  • Better liquidity through equity portion
  • Lower storage/insurance costs
  • Easier partial liquidation

Recommendation

For most investors: 50-50 mix

  • 50% direct physical gallium
  • 50% company equities (gallium producers or users)
  • Balances control with liquidity
  • Reduces storage burden
  • Improves overall liquidity

Allocation by Investor Type

Conservative Investor

  • Total allocation: 2% portfolio
  • 1% physical gallium
  • 1% related equities
  • Dollar-cost average over 24 months

Moderate Investor

  • Total allocation: 5% portfolio
  • 3% physical gallium
  • 2% related equities
  • Dollar-cost average over 12 months

Aggressive Investor

  • Total allocation: 8% portfolio
  • 4% physical gallium
  • 4% related equities
  • Dollar-cost average over 12 months

Monitoring Your Allocation

Monthly Monitoring

  • Track gallium price changes
  • Monitor portfolio allocation %
  • Note any major news/developments
  • Update cost basis records

Quarterly Assessment

  • Calculate actual allocation %
  • Compare to target %
  • Evaluate thesis progress
  • Assess rebalancing need
  • Review risk factors

Annual Review

  • Comprehensive thesis reassessment
  • Major rebalancing if needed
  • Tax loss harvesting (if applicable)
  • Strategy adjustments
  • Advisor consultation

Red Flags for Over-Allocation

  • Losing sleep over gallium position
  • Unable to hold through downturns
  • Checking prices daily obsessively
  • Feeling pressure to monitor constantly
  • Neglecting other portfolio areas
  • Position keeping you awake at night

If experiencing these: Reduce allocation to comfort level

Next Steps

Determine your allocation:

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