Folks looking to make a fortune in small gold stocks need to be
careful: There's a right way to do it... and there are a lot of wrong
ways to do it.
One of the wrong ways to do it is by owning one of the world's most
popular ETFs right now. The symbol is GDXJ. It goes by the name "Market
Vectors Junior Mining Fund." And that name is a snow job.
"Junior" miners are the bloodhounds of the mining world. They are
tiny companies that scour the world looking for the next big gold or
And when I say "tiny companies," I mean it. Junior miners are
microscopic compared to the popular mining companies you might now. Many
junior miners are around $30 million in market value. Compare this to
mega-gold miner Barrick, with a market value of around $52 billion.
That's more than 1,700 times the size of a $30 million company.
That's why, from a marketing standpoint, calling a big investment
fund a "junior mining fund" makes sense. But in reality, it's impossible
to pull off.
You see, there's no way a big investment manager can place a large
amount of money into a tiny gold stock without causing a huge jump in
its share prices. Plus, regulators place restrictions on investment
companies to prevent them from owning too much of one company. Big
investors, like fund managers, can't operate in this sector.
So is GDXJ really trying to invest in junior miners? Let's take a look under the hood...
The average market value of the companies GDXJ owns is $1.6 billion. That's 500 to 800 times the size of most juniors.
GDXJ owns these multibillion-dollar miners because they have the
size to handle big fund flows. Real juniors do not. The folks running
GDXJ are calling it a "junior" fund because of the huge interest in tiny
gold stocks right now.
Don't get me wrong. GDXJ owns a lot of great mining companies. And
it's just the nature of selling to give something a name the public will
be interested in. You'll probably make good money with this investment
if gold and other metals keep rising in price... but it ain't a junior mining investment.
That's actually good news for us: Small investors willing to do
their homework and know the best companies in the sector have a big
edge. These companies are too small for Wall Street to play around in.
P.S. The only way to safely trade junior mining companies is through
research, knowing the best companies, and knowing how to play the big
booms. If you're interested in a revolutionary new way to do all this,