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Investing in gold stocks is one of the best financial planning moves you can make at this point in history, since they are the best stocks to buy. We are facing the coalescence of an unprecedented number of variables that are contributing to the sustained bull market in commodities generally, and precious metals in particular. In the universe of precious metal stocks, the three main groups to choose from are the exploration companies, developers, and producers. There is sometimes a bit of overlap with developers, as explorers will sometimes begin developing their own discoveries. Similarly, large producing companies may take over a key find, and develop the mine to fruition. In any event, the smaller exploration companies, often referred to as the “juniors,†are where the phenomenal wealth can be made when things play out as planned. Investing In Gold Stocks As An All Or Nothing Proposition? While junior mining stocks offer mind-blowing upside, they are also the source of greatest risk. It’s actually a pretty simple dichotomy. These explorers either find an economically feasible deposit or they don’t. However, investing in gold stocks doesn’t really have to be an extreme win or lose situation. Exploration companies that are characterized by sound management will be constantly working to bring diverse projects on line in various parts of the world. Through joint ventures with larger, better funded companies, they can do what they do best and seek out the next great deposit of precious metals or other valuable minerals. Though it’s true that not every attempt will pan out, bight companies that keep a buffet of irons in the fire stand a great chance of hitting pay dirt eventually. Investing In Gold Stocks And The Liquidity Factor… Or The Lack Thereof Investing in gold stocks of the exploration variety requires some key understanding about the role of liquidity as well. A junior resource company might only have a few dozen million shares outstanding. However, you might see only a fraction of a percent of these shares trade on your average day. In fact, a tenth of a percent of these shares changing hands might be perfectly normal. So, with only 20,000 or 50,000 shares moving around, liquidity can be a factor. Illiquid stocks affect your purchasing. If you wanted a hundred thousand shares of Apple, that would be easy to accomplish. Any company with billions of shares, like oil giants, Microsoft, and the like can accommodate. You’d have to buy every available share for an entire week to fill that size order with some of the small gold stocks.
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