Topic: How To Invest

Q: Hi, Pat. Regarding Newmont Mining, your “buy” recommendation is always tempered with “for investors who want to own a gold stock.” Can you explain why investors might want to own a gold stock, and the pros and cons of owning a gold stock?

Article Excerpt

A: We don’t see golds as an essential part of a sound portfolio, and, in fact, gold investing is a poor choice for most investors. For one thing, it involves considerably more guesswork than other aspects of investing. The markets for widely traded goods like gold (as well as oil, foreign exchange, U.S. government bonds and so on) are inherently unpredictable. These markets are so big that there is no practical limit to how much you can trade in them. It follows that if you could predict them, you could wind up acquiring a measurable proportion of all the money in the world. Nobody ever does that. We think it’s a mistake to build your portfolio in such a way that you have to do the impossible such as predict the future direction of gold or any commodity. You’re better off focusing on investments that can generate current income plus long-term capital gains. Three key choices for that kind of investing are stocks,…

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