When compared with investing in gold
itself,investments in shares of gold mining companies
have a number of advantages and disadvantages, depending
on your investment needs. Among the advantages are the
fact that most gold company stocks pay a dividend which,
dependent upon its magnitude and surety, can yield
current income from the investment. And generally, if
gold metal prices increase, earnings and often dividends
will rise.
You should also determine whether the company in
question is a pure gold play or whether it has some
degree of diversification. Diversification, as such, may
diminish the movement of earnings with gold price changes
but may, however, provide cash flow and alternative
earnings in times of low gold prices. Individual
portfolio requirements will dictate which factors are
most important.
An investment in gold mining stocks should be
monitored on a regular basis because ore bodies can be
mined out, unit costs can equal or exceed market prices,
and mines can be shut down.
As with all investments, there is an ongoing need
for timely portfolio supervision. If you can't or don't
want to do it yourself, it can be done for you by
investment in a mutual fund that invests in the shares of
gold mining companies. With such an investment, through
the payment of a fee you can gain a professionally
managed diversification of your gold mining stocks.
Gold Mutual Funds Offer Many Advantages
If you would like to make a modest investment in
gold mining stocks and are looking for the safest and
easiest way of doing it, the answer lies in mutual funds.
Why? First, easy investing. Call a mutual fund and
ask it to send you a prospectus. If you like what you
read, just send in your application form and check.
Second, you can invest in some funds for as little as
$250! Third, a gold mutual fund is less risky because
its risk is spread through its ownership of shares in
dozens of different gold mining companies. Fourth,
there's also a possibility of dividends.
But all investments related to gold mining are
investments in a business -- not in gold itself -- and
carry the normal business risks of any stock investment.
