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Gold penny stock investments are some of the best investments, along with rare earth metals, available to the average, everyday investor. Few people can ordinarily tap investments that can turn $1,000 into $10,000 and it not be that big of a deal. Gold stocks, particularly those of the smaller, exploration variety, can routinely generate three and four-digit returns due to the nature of the mining industry. The junior resource companies, as they are called, focus their efforts on searching for the next world class mineral deposit. When they find it, cash-rich producers can buy these sites at a premium and richly reward early investors. So, I want to share some of my best mining share market tips.
Gold Penny Stock Investments Benefit From Great Leverage
Gold penny stock companies, as noted above, have built-in leverage. The leverage is what allows a 10-cent company to go to one dollar and hand the holder a 1,000% return. The leverage is, in part, a function of the segregated mining industry, where explorers bank all on sniffing out huge mineral deposits. While a great number of companies can tank in this process, the winners sell out at a premium. While 1,000% returns are nothing to sneeze at, 10,000% returns are possible. Even 85,000% returns have happened.
Leverage can also arise from the market conditions, as well as the business model. The stocks are inherently volatile, which will be discussed next. But volatility can be not only extreme, but also irrational. The small market cap of these companies and low number of outstanding shares means that even a modest degree of buying or selling pressure can get the bid-ask spread moving happily. At times, there is even market ignorance to boot. For instance, I’ve seen rare earth companies sell off mercilessly in response to nuclear crises. The only problem is, rare earths have nothing at all to do with nuclear power or uranium. But only modestly-educated investors are acting out of fear and really have nearly no knowledge about the “flavor-of-the-day” stocks they own. Nonetheless, this inefficiency in the market creates great buying opportunities.
Buying opportunities come in other forms as well. These tiny $10-50 million companies do not warrant the attention of money managers. Off the radar from analysts and watchful eyes, it’s not uncommon to find some of these companies selling for less than true value of the company. I’ve even purchased companies for less than their cash on the books. This opportunity will persists. Large money managers simply cannot even take a large enough position in these companies. Even if they did, exiting would be difficult. Moreover, many funds even prohibit investing in these companies. Thus, you can always sleuth these companies for great deals. Then wait.
Gold Penny Stock Investments Feature Friendly Volatility
Gold penny stock companies are far more volatile than most, especially if they are juniors. This volatility can alarm novice investors. To seasoned resource junkies, it’s what makes the world go round. The volatility results in wide price swings as promising companies grind their way to the top. If you have a decent position in a given company, it’s possible to “trade” the stock as it zig-zags its way upward. In this fashion, you benefit not only from the global rise in stock price, but also can capitalize on the same price movement over and over.
If your position is too small to warrant the constant in and out fees, you can still benefit. If you are patient, you can find your favorite stock on sale for any number of reasons. Just a hint of bad news is sometimes enough to put the company into a tailspin. Talented management can overcome typical bad news. As it does, you make great bank. Overall financial market fear can ruthlessly hit miners. These are the times to back up the truck.
Gold Penny Stock Investment Advice
Gold penny stock investing goes smoother, at the end of the day, with good gold penny stock advice. If you’re not intimately familiar with the resource sector, the technical jargon alone can be overwhelming. And the resource sector is quite broad as well, covering not only precious metals, but also base metals too. There are fossil fuels, alternative energy stocks, nuclear and uranium as well. And that doesn’t even touch the natural resource segment of food commodities, which alone is a goldmine if played right.
Having ready access to the intelligence that derives from someone digesting this buffet of material is invaluable. Sometimes you may elect to go with the recommendations of another. At other times, you may abstain, but simply knowing what others are thinking and what they are doing with their money can be a huge benefit. There is always something more to learn. And with a field this large, there is no way you have the time or money to keep up with it all on your own.
Gold Penny Stock, Silver Penny Stock Too?
A great piece of gold penny stock advice is to think broad. Lots of times you hear people talk about “gold,” when they are actually talking more broadly about the precious metal universe in general. Similarly, a lot of times gold stocks are a proxy for the entire resource sector in general. Thus, while people talk about gold, the principles that they discuss are relevant to all precious minerals.
You might also consider where the best opportunities exist. For instance, consider how far silver outpaced gold in 2010. Someone 100% in gold would have been quite jealous over the returns an “all-in” silver investor enjoyed. Silver beat gold’s return by a factor of about 4. Gold penny stock investments will fare well in the ongoing bull market, but just keep your eyes open for great plays in areas such as food, alternative energy, and fossil fuels as well.
