Thursday, July 16, 2009

Gold Stock

Gold stock investment information is important when it comes to gold stock investing so here are some points to consider when investing in gold stocks and gold shares

Some people can unintentionally bypass the meanings of terms used in the gold stocks and gold shares and even investment arena. It pays to thoroughly understand all the terms before reading a gold stock newsletter in order to get a real understanding of what can sometimes be a very technical report on a company. So perhaps getting a list of the terms and words used and looking them up and getting really acquainted with their meaning would be a good start to gold stock investing.

Consult with your financial advisors on what is the best type of investment for you and who to invest in when it comes to gold stocks, gold shares, gold etfs and the like. In addition you will also need to take into consideration your tax position as some investments can incur a tax while others may give a tax advantage. If one is a professional investor it is also likely that subscriptions to gold stock newsletters would be tax deductible.

There are heaps of gold stock newsletters available which give up to date information about many of the gold mining companies and other forms of gold investment such as gold etfs (gold exchange traded funds), current gold stock prices, gold penny stocks and gold stock investing. One can review many samples of these and see which one provides the sort of information one is looking for.

Not putting put all one’s eggs in one basket. An old saying but a very true one. When it comes to gold stocks and gold shares, it is a good idea to diversify one’s holdings. Perhaps some gold shares in gold mining companies but certainly some in real gold not just gold stocks or shares.

The price of gold stocks can vary with each gold company and if an investor keeps all their investment in only one, and it fairs badly, they can lose a good portion of their investment capital.

By the same token, owning too many gold stocks can be a disadvantage. This can happen when an investor keeps buying every time they ‘hear’ of a good gold stock and can end up with 20, 30 or more different stocks, they can end up not so much with a diversified stock range but are simply matching gold stock indexes such as the XAU or HUI. Then if this index goes up or down, their investment will match that and so, in effect, their ‘extra’ diversification becomes one investment and subject to the dangers of that. Many wise gold stock investors apply the principle of “10”, which is to say, they stick to having no more than ten investments in the gold stock arena. There are two advantages to this. Any fall will not cause too much damage but if there is a healthy raise in the price then this can impact very well on a total portfolio. The other advantage is that it helps one to apply discipline. If one wants to buy further gold stock then one would re-examine the current portfolio and maybe even update it.

Ounce for ounce gold stocks are not always equal. The cost of producing an ounce of gold can vary not just with different companies but also with different drilling locations by the gold mining company. Even holes drilled by as little as 15 or 20 feet can make a difference in the cost of an ounce of gold. The US SEC require a mining company to report the results of only one type of ounce totals. Other factors, such as the economics of processing the ore for gold, usually done by an independent feasibility study, need to be looked at. These are then called the Proven and Probable Reserves and should be looked at when considering investing in gold mining stocks.

The most important point of course is to do a though due diligence on any gold stock or gold share one is contemplating investing in. The secret to any investment in gold is to really study as much gold stock investment information as you can.

No comments:

Post a Comment