Why Trade Mining Stocks or ETF’s? 

Two words: comfort and familiarity. Stocks are familiar to most investors and traders. Just about everyone that I know has an online trading account and/or a 401k. Stocks are easy to track, and the concept is an easy one to grasp. For those that are interested in diversifying with gold, adding mining stock to your portfolio is usually a smooth and easy transition. However I liken trading mining stock and ETF’s to making a 3-way call when you can dial direct. Mining stock and ETF prices change primarily based on the price movement in the futures market. However, if you are not comfortable with futures, and you do not want to take delivery of the metals you own, then mining stock and/or ETF’s are the place for you.

What Are ETF’s?

ETF’s are another way for investors to gain exposure to gold and gold stocks. ETF’s are Exchange Traded Funds and they are essentially mutual funds that are traded on a stock exchange in the same way that regular stocks are. Purchasing a share of an ETF means that you are buying into a grouping of multiple stocks that either (1) track an index (i.e. S&P 500), or (2) have been bundled as part of a specific strategy (i.e. small cap China, growth stocks, etc.). This can be good if you want a broader exposure to an industry or an index than the purchase a single gold stock allows. It also means that you can do certain things with ETF’s that can’t do with mutual funds, like selling short or buying options.

Some gold ETF’s are more targeted to the gold industry specifically and are actually designed to track the gold pricing index. There are popular gold ETF’s available that are designed to increase or decrease in price in lock step with the price of gold in much the same way that an investment in actual gold bullion or coins would. So if you want that direct exposure to the price of gold in your investment portfolio, but would rather gain that exposure through your investment account than by purchasing bullion or coins, this is a good solution.

Mining Stocks 

Gold stocks have had an impressive run these past few years, and with gold hitting record high prices recently, you may be thinking about investing. It is important to remember that gold stocks are first and foremost, stocks.  So approach gold stocks as you would any other stock investment… by doing some research.

A second factor to remember is that a gold mining share is not gold. It is a stock first and gold second. A gold mining share is NOT a substitute for the physical metal. It represents a claim against gold in the ground and not the gold itself.  

Contact us as soon as possible for some free information and to learn more. Understanding a few key elements about gold stocks and the gold industry can protect you from excessive financial risk, and provide a safer path to market-beating profits.

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