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One of the questions we frequently get
from our readers is, “What about mining stocks? If gold and silver are
a good investment, wouldn’t mining stocks be a good investment as
well?”
In this informative video blog,
precious metals expert and financial educator Michael Maloney discusses his
own study of mining stocks and how their performance compares with that of
physical gold and silver over time.
“I started investing in gold and
silver back in 2002, when gold was about $325 an ounce,” Mike recalls.
“By April 2003, I was all in. I had discovered silver. I bought a whole
bunch of mining stocks—more than half my portfolio was mining stocks.
And I was lucky enough to catch the last true up-wave on mining
stocks.”
But over the long haul, the numbers
paint a different picture. A comparison of the Barron’s Gold Mining
Index, which tracks the best of the gold mining stocks, all the way back to
the beginning of the first gold bull market in 1971 shows that physical gold
has performed mining stocks by 300%.
“I’m not saying you
shouldn’t be invested in stocks,” Mike says. “I’m
saying that your value, your money that you want to make safe, store it in
physical precious metals.”
“If you have some capital that
you want to risk and try and gain leverage and increase your winnings, you
can put some into mining stocks,” he says. “I believe it is the
second-best bet. You can have huge winnings, but it is a bet; it is a
gamble.”
If you decide to invest in mining
stocks, be sure to seek professional advice, Mike says. “The
professionals that analyze all these mining companies and pick the stocks
have a track record of far outperforming the average stock indexes.”
Mike recommends David Morgan, at silver-investor.com, for silver miners; Doug
Casey or John Doody for gold miners.
“The mining stocks introduce
risk into something [physical gold and silver] that is a sure thing, and on
the average will outperform the mining stocks anyway,” Mike says.
“When you have a mining stock, you can have a mine collapse, the EPA
can shut it down, there can be a strike—there’s
all sorts of risks that you introduce.
“My strategy was to go with the
sure thing, because I have never seen anything with the potential for gain
that gold and silver have, and as favorable a risk-reward ratio, with the
risks being so low, and the rewards being so high.”
Mike
Maloney
GoldSilver.com
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