The natural resource sector has been performing extremely well of late and we are of the opinion that we are still in the early stages of an explosion in share prices. Gains of 100's of percent will be common but not without some risk.

Each investor must decide their own level of comfort and risk tolerance as measured again the potential gains to be made in the coming months.

Diversification provides investors with a means of spreading their risk while still having the potential for some outrageous gains.

We have been extremely bullish on the natural resource shares for many months and have many happy subscribers but we continue to stress the need for diversification, even if within the same sector.

The expression 'don't put all of your eggs in one basket' is always of great concern and as a general rule we would advise never placing more than 5% in any one investment. Never allow one investment to possibly destroy the value of your portfolio. We understand that many times you will be tempted due to a belief that 'this one' is going to the moon but you must spread your risk so you can sleep at night. Currently, we have over 80 different investment positions substantially all in the shares or long-term warrants of natural resource companies and while we are heavily weighted to this sector we are strong in our view of more gains to come. That said, we are ready to close out many positions if we sense the markets are due for a major downturn.

Diversification will mean different things to different investors. How much money you have invested or to be invested will be, in our opinion, a very controlling factor. Let take a few minutes and break this down into 3 categories of investors with $25,000 or less, $50,000 to $100,000 and $100,000 and above. Remember, we are very aggressive in our views of the direction of the markets and it is reflected in our suggested investment allocations below.

Investors with $25,000 or less:
Assuming this is your risk capital we believe you should be aggressive at this time in the natural resource sector.. Let's face it; making 10% return on your money will not change your life. You need some 'homeruns' of 100% to 1,000%. A basket of shares and/or long-term warrants on 4 to 6 different companies will give you some diversification with good up side potential.

Investors with $50,000 to $100,000:
Again assuming this is your risk capital, we would suggest a core holding of say 20% in bullion. If you currently do not have any bullion, i.e., gold or silver coins, we would suggest buying the silver coins in lieu of gold. Take another 30% and invest in a small basket of the large producing gold companies, some of which are now paying dividends. Finally, we would take the balance of 50% and buy a basket of six to ten of the shares or warrants trading on the natural resource companies.

Investors with $100,000 and more:
With more monies to invest you will have more opportunities and can spread your risk to more positions. Again, we would suggest a core holding of around 20% in bullion, a 40% to 50% allocation to the large producing gold and silver companies and the balance of say, 30% to our favorite allocation, the smaller juniors and exploration companies. This 30% must again be allocated to a minimum of 8 companies thus giving you the opportunity for exceptional gains but yet limiting your risk on any one position.

Remember the above guidelines are our personal views and may differ from the views of other analysts or your financial advisors. We know we are aggressive, but strongly believe this is the time for investors to be aggressive, if, you can handle the comfort and risk tolerance as discussed above