COMMON INVESTOR MISTAKES

1.Wrong Number of Stocks:

Too Few:

Owning only several gold stocks increases the likelihood that a problem at one will wreck havoc on your portfolio. Don’t try to “swing for the fences with just a couple… with over 1000 gold and silver stocks existing, you’re too likely to strike out, or be ignored by Mr Market.

Too Many:

Owning too many gold stocks is a common fault of those that attend Gold Shows or subscribe to newsletters with several dozen stocks on their “buy” list. Investors hear or read a good story and buy. Before long they own 20, 30 or more… far too many stocks and thus they are doomed to simply match Indexes such as the XAU or HIU. Most gold newsletters are guilty of recommending too many stocks as it increases the chances of a big win they can boast about, but it does little good for anyone’s portfolio to own all their recommendations... which is why they don’t report total portfolio results, as do mutual funds and Gold Stock Analyst.

The beauty of “10” is two fold:

First, the way numbers work. 10 is large enough that a disaster at one, even if it falls 50%, won’t cause much overall damage. On the other hand, when a Top 10 stock doubles, triples, or more, it can have a big impact on your total portfolio’s value. One never knows when Mr Market will wake up a stock, so having 10 broadens the possibility of a big success.

Second, the discipline of 10. If you find a new stock and want to buy, sticking to 10 forces you to re-examine the entire portfolio and decide if the candidate’s chances are better than the stocks already held.

GSA’s track record shows 10 Gold/Silver Stocks to be about the right number to own. And even if gold will only be a portion of your portfolio, in today’s era of $10 internet trade commissions, a $100 total transaction cost is minor “insurance” to own all of the Top 10.

While GSA covers over 60 miners, that doesn’t mean we like them all at the current price… but at a different price, or after an “event” we might. Already following the stock means that we don’t have to “get up to speed” after price changes or events and we can immediately tell subscribers to act. And, covering virtually all producers is how we compile our unique industry-wide database that lets us find the Top 10 Stocks.

2. All Ounces are Not Equal:

An ounce is an ounce is an ounce… right?  WRONG!!!  Don’t be confused by the various “ounce” totals thrown around by the companies.

The US SEC allows miners to report only one type of ounce totals, Proven and Probable Reserves. These are ounces determined by drill holes spaced close enough, as little as 15’ apart, to have a high probability that their grade results can be projected over the untested distance between the holes. Plus, the deposit’s economics have been verified by an independent feasibility study that shows the capital required to build the mine and processing facility will have a positive return. A combination of these two criteria qualifies a deposit’s ounces to be P+P Reserves.

Other ounce designations… Mineralization, Measured, Indicated, Inferred, Resource, Global Resource, etc... have wider drill spacing so the ounces are less certain to exist and/or the deposit has not been shown to be economic. For example, sea water is known to have billions of ounces of gold… but the grade is so low that it’s not economic to attempt recovery.

3. Buying entire position at once:

Just because you agree with GSA, that a stock has the long term potential to double, it doesn't mean that Mr Market will suddenly see the same upside and start buying right after you've bought. It takes time for value to be recognized.

NEVER buy your entire position at once, whether it's a new stock or establishing a position in the precious metals sector. Scale in... 50% of your final investment is the maximum to start. You may well get a chance to buy more later. If you don't get this chance, you'll have a low cost initial basis and there's nothing wrong with adding to an already winning position.

Article source:http://www.goldstockanalyst.com