Gold Stocks & Shares

If you don’t like the idea of buying gold and physically holding it, then you might be better off looking at gold stocks and gold shares.

While owning and holding gold coins and bars, etc has it’s own security risks and other factors to be aware of, gold stocks and shares also require some careful consideration.

First of all you have different levels of risk.

You might for example want to buy shares in a company that holds gold, where your investment and it’s value is tied to the price of gold and whether it goes up or down, or you might prefer a more speculative risk where you invest in gold mining companies with the potential for greater returns.

If you opt for the gold companies that buy and hold gold, then you again will pay a premium, there is the cost of buying the gold as well as the cost of storing it securely, plus the company wants to make a profit, so your returns would be lower than actually buying and holding the gold yourself.

With mining companies there is a whole host of worrying problems, it is whether you are prepared to take the gamble or not that will determine if they are right for you.

The famous author Mark Twain lost his entire fortune because of a series of bad investments in gold mining companies, as he put it:

“A mine is a hole in the ground owned by a liar”

 

You might think that today things are safer, with regulation and other checks, but when you think of the Enron scandal, which is relatively recent, you can see that fraud is rife even on the stock market, and with gold mining things get particularly difficult.

Firstly you have to take the word of the miners about the amount of recoverable gold in the ground.

Secondly you have to take their word about the cost of recovering each ounce of gold, and whether it will be profitable.

Third is the location of the mine itself.

Often gold mines are in unstable regions where the possibility of civil unrest or war is very real indeed, and if the worst were to happen then you could see your investment lose all of its value overnight while you’re still tucked up in bed.

There is absolutely no guarantee when it comes to the value and price of gold, but if you are holding gold coins or bars then at least if gold prices do fall you will still have something left, whereas if your gold miner goes bust then you may well get nothing back.

Of course having said that if they strike it rich, then so will you, so it’s all about weighing up the risks and rewards and deciding if you can stand to lose your investment if the worst does happen.

If you decide to invest in a gold mining company then you need to do your research, and the absolute worst places to do that are on share dealing forums.

These places are full of people who have already invested and are trying to convince each other that they’ve done the right thing, so take anything you see or hear on them with a large pinch of salt.

There is no easy way to decide whether one gold miner is a better investment than another, you need to do as much research as you can and then cross your fingers – and good luck if you do buy gold shares in a mining company, I hope that you do strike it lucky.