At the end of last year, we at

TriVest Wealth Counsel

began adding

silver

exposure as part of a broader increase in our targeted commodity allocation to precious metals — intended as a form of debasement insurance within client portfolios to counteract a falling

U.S. dollar

. Our vehicles of choice were physically backed

exchange-traded funds

(ETFs) such as the iShares Silver Trust (SLV) and, in Canada, the iShares Silver Bullion ETF (SVR).

What followed was unexpected: a monster rally in silver that forced us to exit our position and lock in substantial gains. Although silver is famously volatile, when an investment behaves this way, shifting from a fundamental allocation to something that trades more like a speculative instrument, it sets off alarms. Once an asset becomes speculative, you must get the exit right or risk giving back far more than you made. And market timing is not something the vast majority of investors can do consistently.

Casinos understand this better than anyone. They are among the world’s most profitable businesses not because they rely on luck, but because they rely on math. Every game, whether it be blackjack, roulette or slot machines, is engineered around a house edge, a built-in mathematical advantage ensuring that, over time, the casino always comes out ahead.

That’s why they work so hard to keep players engaged, offering free drinks, windowless rooms, bright lights, no clocks, pumped‑in oxygen, endless perks. Everything is designed to detach the gambler from time and discipline. Even if a player gets lucky early on, the casino knows that if they keep playing, the house edge will grind them down. One of the industry’s best‑kept secrets is that short‑term luck rarely survives long‑term math.

A similar dynamic can play out in financial markets, especially during bouts of extreme volatility such as the recent action in silver. After soaring for most of 2025, on Friday January 30, the iShares Silver Trust (SLV) plunged roughly 30 per cent, its worst day on record. This came after the nomination of Kevin Warsh as U.S. Federal Reserve chair. He is widely viewed as a monetary hawk, sparking speculation that he may help strengthen the U.S. dollar and igniting heavy selling across the precious‑metals complex.

The problem is that many investors who missed the large 2025 rally tried to “catch up” by piling into leveraged commodity ETFs, which promise amplified daily returns typically two or three times the underlying move. These products can deliver eye‑popping gains on big up days, but their structure hides a mathematical trap.

Unlike traditional ETFs, leveraged ETFs reset daily. Their leverage applies to each individual trading day and not to longer periods. In volatile markets, that daily compounding can permanently erode returns, even if the underlying commodity ends up flat or higher over time. Volatility therefore becomes the hidden house edge, and it works against investors the longer they stay at the table.

That danger becomes painfully clear during sharp corrections. On the same Friday, we witnessed some double-leveraged silver ETFs collapse about 70 per cent within 24 hours, far exceeding the decline in the metal itself due to its multiplier effect. Losses of that magnitude in a single day are effectively permanent because the ETF must climb exponentially just to get back to breakeven, which is often a mathematical impossibility.

Short‑term winners can quickly become long‑term losers simply because they stayed at the table too long. Casinos don’t need you to lose quickly, just consistently. Leveraged ETFs can often operate in much the same way. They’re engineered for speculative betting, not long‑term holding, yet many investors treat them as if they were ordinary ETFs. For those who get it wrong, they can become wealth destroyers masquerading as opportunity.

Even single‑levered ETFs can turn into a form of gambling if not managed appropriately, as evidenced by our fortunate timing in exiting our position during the sudden and unexpected rally. American billionaire investor Stanley Druckenmiller, summed it up perfectly when

he said

his mentor once told him that it takes hundreds of millions of dollars to manipulate a stock up, “but the minute you have this phony buying stop it can go down on no volume and it can just reprice immediately.”

Maybe Kenny Rogers really was on to something when he sang, “Know when to hold ’em, know when to fold ’em, know when to walk away and know when to run.” Or perhaps the wiser move is not to sit down at the table in the first place.

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Martin Pelletier, CFA, is a senior portfolio manager at Wellington-Altus Private Counsel Inc., operating as TriVest Wealth Counsel, a private client and institutional investment firm specializing in discretionary risk-managed portfolios, investment audit/oversight and advanced tax, estate and wealth planning. The opinions expressed are not necessarily those of Wellington-Altus.

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