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Canadian gold stocks, particularly the exploration stocks, have some of the greatest volatility of any sector or investment class on the planet. In fact, this is true of most all junior resource companies. These are the companies that are primarily involved in the explorations or development stages of mining operations. Unlike their big brothers that actually produce the material they are mining for, the juniors may not even have an economically-prudent deposit yet.
Canadian Gold Stocks Introduce Volatility As Your Best Friend
The volatility of Canadian gold stocks is what presents a great deal of the opportunity and makes them the best stocks to buy. Volatility is the life-blood of the resource sector. A speculator with a trader’s skill set can actually make reasonably good money where there is ample volatility. Irrational price swings can occur in thinly traded equities. The slightest bit of seemingly bad news can send a tiny junior resource company into an overbought condition in less than a single trading session. Volatility is basically essential to speculation. It’s what gives you the chance to buy companies on sale on a regular basis when the broader investment sentiment is either panicking or suffering a liquidity crunch.
Canadian Gold Stocks Provide Leverage On Top Of Volatility
Leverage is another great plus of Canadian gold stocks. It is a distinct feature from volatility, although the two often compliment one another. Junior resource companies can produce returns that leave the mere ebb and flow of volatility in the veritable dust. You’ve probably heard someone speak of a “10 bagger” before. In essence, this is simply an investment that multiplies ten-fold. It produces a 1,000% return or better.
Volatility, coupled with market inefficiencies, allows one to pick up solid, promising companies so cheap that four-digit returns can become commonplace. Tiny junior resource companies are not practical for large institutional investors. It would be difficult for money managers to take a giant position in a small company with a market cap of $10,000,000 or fifty million or even one hundred million dollars. Assuming such a position could be obtained, liquidity could present a problem when it’s time to exit. For this reason, among others, a lot of these little companies remain undetected by watchful eyes of analysts. Consequently, you can quite frequently find companies selling for quite a bit less than they are worth.
When you are able to purchase a company for far less than its actual value, you are way ahead of the game. With volatility added to the mix, it’s even possible for you to buy companies for less than the amount of cash they have in the bank! You start the day with a built-in gain that’s nothing to sneeze at. Once the company matures and the herd catches up with you, four digit gains are no longer on the agenda. Returns of 10,000%, 20,000% and more have been recorded in this sector.
Canadian Gold Stocks – Who’s Your Guide?
One of the keys to success with Canadian gold stocks is to have a trusted source of information to guide your investments. The breadth of the resource sector is too vast to try to handle it alone. Sometimes knowing what others know and what they are doing can be helpful. At other times, knowing what others are not investing in can be just as useful. Input from various sources will allow you to separate the wheat from the chaff and determine who is worth listening to.
Learning from others who have paved the path before you is critical to learning to trust your own instincts as you master the marketplace and discern what matters and what is mere distraction. Once you learn to distinguish puffery from promise, you’ll have the confidence to make some of your own decisions. Until that time, it’s a good idea to have a “sounding board” to double-check your judgment.
Canadian Gold Stocks – Generalizing For Greater Gains
Any more, I find that the term Canadian gold stocks or “gold” is typically used to more generally refer to precious metals in particular, if not the resource sector investing more broadly. While gold is the de facto “leader” in the public mindset, equal or better gains are there to be had outside of gold. In 2010 alone, silver far outpaced gold. Silver was up about 100% in a year’s time, whereas gold was up just 20-25% or so. Great opportunities exist with any number of Canadian stocks, including uranium, natural gas, rare earth elements, alternative energy, oil, and other resources. Beginners will inevitably make blunders along the way. But disciplined perseverance can lead to results with Canadian gold stocks that can forever alter your family’s financial condition, and I recommend them as the best stocks to buy now.
