If you are new to precious metals investing, you may find it daunting to invest in silver or may be confused on how to trade gold. Let’s what happen to me when I just started my precious metals investing business a few years ago. It’s definitely not an easy investing to do! But I managed to do it after spending a great deal of time and patience, doing lots of research and reading.
When it comes to investing in gold and silver companies, there are many pitfalls and traps beginners in precious metals investing and even experienced investors can fall into. The good news is that if you buy gold and silver mining companies the right way, the market will eventually reward you as it the value will ultimately be reflected in the share price. You can take the short term price fluctuations and market inefficiencies as opportunities to build your precious metals investing portfolio by buying when the price is low. Over the longer term, the winning gold and silver mining stocks will be there for all to see.
We are now in the best era to do online gold trading. As you know, we are in a strong bull market in gold now for near on a decade. There is a tons of information regarding gold trading and silver trading, information which you can be useful for your precious metals investing. When you combine this with some of these key factors, you can be on your way to a profitable precious metals investing journey.
Where Should You Focus For Precious Metals Investing?
The first step to precious metals investing success is to know where to focus your attention on. In the precious metals investing sector, there are basically 3 development stages you can invest in. These are:
- Exploration – A precious metals company may be exploring for a potentially viable deposit to mine.
- Development – A precious metals company owns a deposit and has conducted studies to determine its viability.
- Production: A precious metals company has deemed a deposit viable, built a mine and is producing the precious metals.
The stage in precious metals investing you should focus your attention on is the production stage. Once a company is producing there are literally few places to hide. All false claims and reports that are prevalent in the development state cannot be hidden and are for all discerning investors to see.
Precious metals investing is a game of imperfect and incomplete information. In the precious metals sector, information in the development stage are at most incomplete and hard to come by. However, when production starts, more information will be unfold. You will notice that the risk/return profile also reflect this information flow.
It perturbs me that many who are new to precious metals investing focus on the exploration and development stages. maybe there are attracted to the potential of big profits. However, they may not be aware of the high risks involved by doing precious metals investing at these stages.
Therefore, if you are new to precious metals investing, the safest and more logical area to focus on is the area where the most information are made available i.e. the production stage. In this way, your chances of becoming an instant millionaire may not be as high but you can be more assured that your longer term returns are more viable and your returns can still be very attractive.
Precious Metals Investing Driving Factors
I’v mentioned the key is to buy gold and silver mining companies the right way and the market will eventually reward you. To do it the right way, you need to know these 3 driving factors when it comes to buying precious metals mining companies:
This refers to the ability of the precious metals mining company to generate free cash flow from its projects. You need to ensure the company has enough to pay off debt associated with project development, or to reinvest into exploration and acquisitions to help grow and secure the company’s future. Profitable companies are less likely to dilute shareholder wealth this will reflect positively in the company’s share price.
This refers to the precious metals mining company’s ability to grow production over the long term while adhering to our profitability requirements. Be careful of companies grow production for the sake of it, without properly considering important factors such as return on investment.
This refers to the ability of the company to sustain its production and not run out of reserves of precious metals. The gold and silver trading market is known to punish companies which have high cash balances with very little reinvestment in new projects. Therefore, It is vital for a precious metals mining company to grow its business within the confines of what it can realistically sustain.
Therefore, the best precious metals investing is to select companies that outperform in these three important areas. Chances are these companies have excellent management teams with the knowledge and experience to excel in these three areas for the future benefit of shareholders like you. You should also look at the track record of the companies. The longer their successful track record, the more credence and confidence you should give them.
In this way, you can find precious metals investing to be an easy investing indeed.