In
general, when investors look for investing in gold directly into their
portfolio, they have the following choices to make: either buy a physical asset
like bullion bars, trade-in commodities market or many investors prefer to take
an indirect approach and invest in the stocks of gold mining companies. Most
investors choose this indirect approach of buying stocks of companies having
gold mines, for instance, in Colorado and implement strategies using options on
gold futures. These companies offer a more liquid and low-cost way to invest in
stocks and also comes with the allure of high rewards. But before you dive into
it, choosing a company with a good track record, debt and the number of gold
mines in different regions like Colorado should help you arrive on your
decision.
Things to consider before investing in gold mining companies
Before
you invest in gold double check your goals and long term strategies as gold is
not a cheap commodity and a wrong decision can blow your hard-earned money.
Like any investment, if you intend to purchase gold stocks here are a few points
that you can follow:
● Choosing an investment mode:
Investing directly in gold mining companies offers
exposure to gold. Note that, it is different than actually holding a physical
commodity. But if you like the idea of exposure to gold, gold stocks can prove
to be a good choice.
● Companies having multiple
operations:
You are buying from a company, so it is important that
you choose a company that is not dependent on a single gold mine production or
has political stability in a single country.
● Start small:
In the initial stages of investing, it is possible to
get overwhelmed and invest huge amounts of money at once which can hamper your
investment choice. You can avail the advice of consultants which can help you
make a better choice with the best returns.
Remember to start small and add more if you find it
more convenient.
● It is important to stay
updated:
It goes without saying that you should keep yourself
updated on the rates, daily happenings and the state of the market to ensure
you know about your investments at a given time. Regularly checking on gold
rates can help you keep track of your investment. It is imperative to look for
a company that is well established so that the investors don’t need to sell
stocks at low prices.
What qualities to look for when investing in a gold mining company?
- The more effectively they manage
their company the better as it will help protect your investment in the
long run.
- As the gold mining business is typically located in hostile environments. So it is important that you look for a company working in a secure and politically stable region.
- Transparency is one of the important factors you should look for when choosing a gold mining company.
Examine the miner’s current cash position and their outstanding debt. Then you can proceed with the decision to buy in a lump sum or at regular intervals.