Just like back in the old west days, gold mining companies invest time and resources to discover, mine and process gold. To be able to finance this expensive operation many companies will offer public shares which, as you probably know, allows the average person to own a small piece of the company. When the prices for gold goes up, so does the profit margin and that's when the investor can see a profit from owning gold mining stocks. To increase your chances of making money, and not losing money, there are some simple steps you can take. Remember though, all types of investing carry some risk, though you may be able to mitigate a lot of the risk by gaining knowledge, you can't guarantee you'll make money so never invest more than you can afford to lose. One thing you should do first is to figure out how much money you can allocate to buy mining shares.
The general rule is to have about 10% of your portfolio made up with precious metals, but since mining has it's own unique dangers not all of your precious metals allocation should come from mining company shares. Pick your companies. Some people prefer to go with just one large cap company for their mining shares allocation. Other's prefer to have several mining companies as part of their portfolio, so if one company fails they aren't completely out in the cold. Still others enjoy the thrill of investing in younger companies that don't have much of a track record.
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