Gold penny stocks are increasingly becoming one of the most popular methods to invest in gold, especially for anyone who is just starting out in the market. Penny stocks are stocks that are valued at a price lower than one U.S. dollar. These are easy buy because a lot of shares can be purchased for a minimal investment, and with that many shares, even a move as little as one or two pennies can become a substantial profit or loss.
Gold penny stocks represent small mining companies that are at the forefront of gold movement. Typically, if the price of gold goes up, the price of the stock goes up. The same theory works if the price goes down, making penny stocks a risky investment for anyone who doesn’t have a clear understanding of how to work the market. Of course, that’s what this article is meant to deliver: an understanding of how to make money in penny gold stocks and increase your portfolio.
One of the best strategies when choosing gold penny stocks is buying a company that has a strong level of production. Any production is good. Many novice gold investors make the mistake of purchasing stock in a gold mining company that is still in the exploratory phase. That is, they haven’t yet found gold. Investing in a company like this is like buying a lottery ticket. They have just as much chance of finding gold as they do of missing completely.
The second piece of advice for anyone who is interested in gold mining penny stocks is to buy stock in multiple companies. If you only buy stock in one company, you’re metaphorically putting all your eggs in one basket. Conversely, if you buy stick in 40 gold mining companies, you’re spreading yourself out too thin. Most investment analysts recommend purchasing between 10 and 20 gold mining penny stocks.
Now, if you’re wondering what the best penny golds stocks to invest in are, you’re going to need to do a lot of research. First of all, look at where they are mining or exploring. Have there been gold discoveries in that region previously? How long did those mining companies last before the mines ran dry? Next, look at how long it takes for the company’s stocks to benefit from a rise in gold prices. Ideally this should happen within a few days. If it takes a week or more, you might want to look into a different gold mining company.
There’s always a fair amount of leverage for gold companies. If the price of gold rises 10 percent, the stock price will usually go up closer to 20 or 30 percent. Of course, this swings both ways, so you have to hold on and wait it out until the prices level out again. You should remember that the gold market goes through several periods of about 30 percent ups and downs throughout the year. Analysts refer to this as inhaling and exhaling. One of the biggest mistakes that newcomers make is selling as soon as the market drops a tiny bit.
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