Last Sunday the Wall Street Journal ran this article which offers a nice overview of the various ways in which you can have exposure to gold.  Here is what it had to say about my favorite method of gold exposure in an investment portfolio, gold mining stocks:

With publicly traded mining companies, you don’t own the metal but you do own shares of companies digging holes in the earth.  This is the most leveraged gold play, since a rising — or falling — gold price is spread across hundreds of thousands or millions of ounces the company has in the ground.

Pros: More bang for the buck.  Mark Johnson, portfolio manager for the USAA Precious Metals & Minerals Fund, estimates that ‘you probably have to put two times as much money into bullion or ETFs to get the same exposure to gold as you do with mining shares.’

Cons: Exposure to all sorts of corporate and geopolitical risks, based on the countries in which a particular gold miner operates.  And because mining is so energy intensive, rising energy prices can negate some of the increase in gold prices.

My Thoughts: By owning diversified mutual fund portfolios of gold mining stocks and holding for the long term, the risk of this asset class is minimized compared to picking a handful of individual mining stocks.  And in today’s environment, I currently have nearly 10% of my investment portfolio in gold mining stocks.

(Via Roland Manarin)

Related posts:

1. Diversifying Your Investment Portfolio with Small Cap Stocks
2. A Few Random Musings
3. Gold, Derivatives, & the Stock Market (Plus: Why I Don’t Move More Of My Nest Egg To Cash)
4. This Sounds Familiar
5. 401k Investing Made Simple

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