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This Popular Gold Investment Is a Snow Job

Written by Subject: Gold and Silver
This Popular Gold Investment Is a Snow Job 
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 silver discovery.
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.
Junior mining stocks are popular with investors and traders because of this tiny size... and because they offer the chance for once-in-a-lifetime gains. When one of these tiny companies finds a big precious metals deposit, the returns are extraordinary. They can turn a modest $5,000 investment into hundreds of thousands of dollars.
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.
Good investing,
Matt Badiali

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, click here.

Further Reading:

Get an idea of how outrageously successful junior resource trades can be here:
An Unusual Way to Turn $1,000 into $1 Million in Four Years
In January 2005, Paladin Energy was up to 47¢. That's a 4,600% gain from 2003 levels. By the end of 2005, it hit $2 per share… a 19,900% gain in just 30 months.
How to Make 120% in One Month Trading Gold Stocks
Shares of Esperanza soared from $0.25 in summer of 2005 to over $4 by early 2007. That's 1,500% in just over 18 months.
The Amazing True Story of 1,880% Returns in Seven Years
Due to capital appreciation, that original $20,000 has a current value of $327,226. That's a 1,880% return in just seven years.

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