There are various methods for selecting stocks and each investor swears by his or her own technique. Some are characterized by complex calculations, while others are quite simple. Not every investor has time to research each stock tip received so these individuals need to develop a quick method to assess whether an investment is worthwhile. This holds just as true with silver stocks as it does for other stock investments.
When investing in junior silver exploration companies, the main things to consider are the price and what you get for that price. In this context, the term “price” refers to market capitalization rather than stock price. This market capitalization figure represents the value of the company if an investor were to purchase all shares at the current stock price. When an individual purchases stock of a company that has a $10 million market capitalization, he or she is saying that the company should be worth at least $10 million.
The market cap is equal to the stock price multiplied by the number of shares. An individual will not know the company’s value without first knowing the number of shares that have been issued. Therefore, share price alone should not be the basis of an investment decision in junior silver miners. Investors should continually track the market cap as long as they own the stock. Some experts advise investing in junior mining companies with $50 to $100 billion market caps or lower.
Penny silver stocks, which trade for $5 or less per share, are a risky investment but can sometimes yield a profit. If stocks are too low in price, like fewer than 20 cents per share, it correlates to a very high commissions rate. The charters of some U.S. institutions prohibit them from purchasing stocks in the $5 or less price range and many brokers are not permitted to recommend these stocks to clients. This means investors are often left on their own to determine which penny stock is a good investment.
Whether it is penny silver stocks, junior silver miners, or shares of silver in another form, investors should research these shares and the companies they represent prior to making an investment. Analysts recommend adding precious metals to the investment portfolio because their prices are expected to skyrocket. Getting the most return out of this investment will be based on whether the investment decision is wise or poor.