Yes in some cases and a big no in others.
Every investor is different and individual, and each will have unique objectives and acceptable strategies. Gold stocks can be a great opportunity in some cases and a poor choice in others, depending on the circumstances and the investor preferences. For those who want to get in on the current gold rush companies that are in the gold sector can be a popular choice.
Right now gold is sought after because of high prices and the continuing effects of the global recession that recently occurred. This metal can be used as a hedge against inflation but this often includes owning and possessing the metal and not just gold stocks. When physical gold is owned the investment will never completely lose all the value, and the gold ore can still be sold or used for bartering.
Stock market gold can lose all the value invested in this option if the company fails or the market suddenly takes a big hit. Since the actual ore is not owned, only stock in the company that explores, mines, or uses gold in some other significant way. The stock shares are based on the value of the underlying company, not backed by the actual precious metal. This means a complete and total loss of capital in some cases.
If a company is a solid value choice then an investment may be ideal, but if the company has a spotty history, a reputation for shady dealings, or any other possible red flags then a different stock should be chosen instead. Each stock and underlying company will have specific drawbacks and advantages, and each of these must be evaluated by the investor.
Choosing stock market gold over the actual physical metal may not always be the best possible choice, but for some investors this step may make perfect sense and meet the investment goals and objectives in the individual case. Compare all of the investment options available to determine which choice makes the best sense for the specific investor. This may be a different company or investment method for every person.
While it’s a personal decision, it is a widely known investment standard that you should hold between 10-25% of your assets in precious metals. Wealthy individuals keep around 10% of their wealth in precious metals, to counteract against crisis events. This is why diversification is so important.