First Investment of the Year – Gold

By | 01/04/2012

It’s only the beginning of the year and I’ve already made a big item purchase. Earlier today I bought 45 shares of Goldcorp Inc. (G.TSE) at $45.95 each. The price is very attractive, the company is well managed, and it’s financials are in great shape. This is a long term hold for me. I don’t care if it drops to $30 next month. I’m confident in the research I’ve done and believe this company will out perform in the decades to come.

Total investment today was about $2000. But since I bought this in my margin account, I only had to pay $600 from my own pocket, and the bank lends me the remaining $1400 at a low interest rate. Leveraging is one of the secrets to financial success (as long as you don’t over extend yourself.) It’s essentially how banks can make so much money, by using other people’s money.

Why Goldcorp? First, I like gold. It’s a good hedge against inflation and I think we will continue to see inflation in the future years to come. I chose a gold producer rather than just buying physical gold (which you can also do) because historically speaking gold companies are undervalued right now relative to bullion. And even if gold prices don’t move up, but the stock market does, then I still benefit. Gold companies are a good place to in be right now, and Goldcorp offers the best value compared to its peers based on growth potential, earnings ratios, and cost structure. And their headquarters is around the same location as Silver Wheaton’s office in downtown Vancouver! Support your local community right (^_^)

Their stock chart seems to suggest an interesting trading opportunity. I won’t speculate on this stock because I plan to hold it until I retire. But next post, I will explain how to study the graph above to try and predict its short term swings in case anyone is curious about how stock analysts try to predict the market.

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