Gold stocks that you cannot ignore

The price of gold is rising wildly and that has helped a lot of investors who have invested in gold stocks. A lot of people believe that gold will hit the $2300 per ounce prices.

Now you may be wondering how does the high prices of gold benefit the companies. Well the chances are that the leaders in the gold mining have a fixed cost of production and then subsequently any price rise of gold will give them more and more margin.

A lot of people who believe in long term holding would be surprised at this however I must say that even if your strategy is longer term you will have to look at the short term trends every once in a while to gain a lot of money and then invest that back to make money online for long term potential.

Well studying the trend for gold as always is a fundamental thing as it gives you the picture about the economy as well it gives you a picture about the dollar strength versus the other economic currencies That is where the forex trading angle comes in. In my view fundamental analysis and macro economic indicators are a major factor in long term investing and forex trading.

The best gold stocks that you invest in are

Agnico-Eagle Mines (NYSE: AEM)

Goldcorp (NYSE: GG)

Kinross Gold (NYSE: KGC)

Barrick Gold (ABX)

Newmont Mining(NEM)

IAMGOLD(IAG)

Randgold Resources(GOLD)

Placer Gold(PDG)

Again these are the market leaders in gold however there are other gold companies which are considered as junior gold stocks.

The point which I am making here is that gold is the commodity that you should watch. Indian reserve Bank as well as the Sri Lankan reserve bank has bought gold from IMF. Also China and India are the biggest consumers of the gold via their large middle class population. So you better track this commodity if you wish see the influence of that on the currency.

Stock Market Basics - Common Stock vs Preferred Stock

Types of stock – common vs. preferred

The type of stock most commonly that you will see in the market is the normal stock or which is known as common stock. In fact most of the companies issue that stock only.

You would wonder why the common stock is different than the other stock known as preferred stock and why the companies issue them. As a stock market basics student you should know the difference if you want to buy the correct type of stock and earn money.

What is different is the way the voting rights are issued to people and also that drives how the preferred stocks have less risk than the others. Let us say the company wants to have the voting rights restricted to a certain set of people but also wants the general public to invest in stock but does not want to give them much voting power.

Now this voting power is generally needed to get resolutions and agreements done at the Annual general body meeting or the extraordinary general body meeting. Suppose hypothetically if the entire general public ganged up against the company then you can always have the resolutions blocked and the may be have some things be approved with the people managing the company having no say in the decisions.

To avoid these kinds of situations it is required sometimes by the company to offer preference shares to certain investors who are more than likely to side by the management. These preference shares usually will carry more voting power than the general class of shares. For example preferred shares will have ten voting rights per share as opposed to common shares which will have only one vote per share.

The preference shares have a fixed dividend and they are assumed to be like a hybrid between shares and bonds. Also in the event of liquidation these stock are known to be very much like the common stock apart from the fact they will come in first to get any assets upon liquidation and then will come the common stock holders.

Classes of Stock

Several companies also offer different classes of stock which may be helpful for the voting rights differentiation as well. If you are reading a stock market ticker you would notice the class right next to the stock symbol e.g share XYZ will be marked as XYZa and XYZb or XYZ.a and XYZ.b

Hope you enjoyed this stock market basics lesson about classes of shares.

Stock Market Basics - Risk vs Return

As your learn the stock market basics you will need to make sure your understand the basics of what is Risk vs Return theory.

The risk of owning a stock which may or may not do well can be quite a handful. However if you play your cards well the returns will be greater. Let me give you an example in the case of the bonds let us say a company will say they will pay oout 7% interest on the bonds. That means you are now bound to earn 7% annualy on your investment whatever may be the state of the economy or the company.

However let us say if you buy a stock which does not give out any dividends but you still go ahead and buy the stocks. This stock will be with you let us say for a few years. These years may see the economy in general go up and then down. But the fact is that the stocks can average 10-12% over a period of few years. Yes, that is correct but in may so happen that the company goes bankrupt or goes into serious problems and not able to recover such that you will ultimately have to sell at a loss or hold the shares in the hope of the rebound of the company's fortune. What that menas that you carry the risk of the losses and it may so happen that you lose all your money however you will make much more money in case of the company doing well.

As a stock market basic rule the higher the risk higher the return but in turn the higher return may not always be true but also can be likely high losses.

The trade off of risk vs return is everywhere and as they say stock market is not for the faint hearted . You should have appetite for risk and stomach for riding over the losses for longer periods of time till the tide turns and you rake in huge abnormal profits.

That means what is the time horizon for your investment and for a short term player the appetite for risk should be larger than the appetite for risk for long term players. I will detail in another session of the stock market basics what is short term versus long term investments.