From what I've seen warrants are a very, very misunderstood, yet powerful, investment tool. If you really believe in the silver/gold bull market and are willing to take more risk, I strongly urge you to at least consider adding warrants to your portfolio for the greater leverage they offer. So just what the heck am I talking about?
Warrants are, according to Wikipedia, "a security that entitles the holder to buy the underlying stock of the issuing company at a fixed exercise price until the expiry date." Think of them like a call options - the "option" but not the right to purchase the underlying security. This allows you to control much more shares of a stock.
EXAMPLE: Say you were really bullish on Sandstorm Gold, which traded at .71 cents back on 12/1/2010. Instead of purchasing $1,000 of the common stock, you purchase $1,000 worth of the 2014 expiry warrants, which traded for .38 cents on 12/1/2010 (strike of .60). These warrants offer roughly 1.8 the leverage of the common stock. So here are the outcomes if the stock goes to $6.00:
.71 to $6 - gain: About 800 percent.
.38 to $5.90: 1,453 percent!
That is the beauty of warrants - the leverage. If you were bullish on Sandstorm, it would make sense to buy the warrants as well as the common stock because you'd have nearly four years before they'd expire and they were already in the money. If the stock plummeted down to .40 cents, however, you would be out of luck. You are basically making almost double the money for taking on the added risk.
The Risks - There are certain risks involved in trading warrants, of course. With all that leverage comes some risk! The first is low trading volume. They are typically thinly traded (meaning that you could have trouble placing an order). The second risk is time decay, meaning that "Time value" diminishes as time goes by. Please educate yourself further before making any investment decisions. There is always risk involved with greater leverage!
Full Disclosure: I am long Sandstorm Gold common stock and the 2014 Warrants.