Page 86 - Introduction to investing in Gold

The Beginner's Guide to Investing in Gold
If you think they may be for you, I’d then put them through the B.R.I.D.G.E. system. In a strong bull market, companies that don’t meet these criteria could still do well, but since you don’t know how long a bull market will last, you don’t want to be left holding weak companies if it does. So be careful what you pick.
I’d go further than that.
Think of the gold-mining universe as a fantasy football team:
The largest companies with many mines are your goalkeepers. Smaller companies with higher risk are your defenders.
Those who are perhaps new to production are your midfielders. The explorers (so no production) are your forwards.
If you want a good team, it makes sense to have players in all positions, so I would look to have a broad portfolio. If you want to take less risk, put together a more defensive team. Alternatively, if you want more risk, you may want a more attacking formation. Because I know the market well, I’m comfortable taking more risk; if you’re new to it, you may want to be a bit more conservative.
If we get another bull market, you don’t need to just invest in the riskiest stocks to do well. The share prices of goalkeepers and defenders can often double, sometimes treble, if the shares really take off.
Having identified what you want in your portfolio, I would then urge you to write down what you want to make. When you’re happy with your return, you can then sell. Perhaps you’ll sell your stocks over a period of time but still sell. You only make money when you sell.
Another big mistake people often make is they sell a good gold mining stock and go and buy a bad one because it’s cheap. If it’s cheap, there’s normally a good reason why (it probably fails the B.R.I.D.G.E. system). Although you may be able to get away with this for a while, as I’ve just said, you could be left holding shares in particularly bad companies when the cycle turns. There’s no point in making money and then losing it!
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