AZ Investor

What Every Investor Needs to Know

There are multiple ways to invest in precious metals, whether it is buying the actual gold, silver, and platinum, for example, or making metals-related market investments in mutual funds, exchange-traded funds and futures, as well as shares of precious metals mining companies.

Regardless of the type of investment, investors should understand the following risks:

• Precious metals are commodities where prices can fluctuate dramatically, sometimes even more than the general stock market;
• Precious metals may not provide long-term investment returns; and
• Precious metals are high-risk, speculative investments.

Also, investors should beware of "exploration" companies. Some may offer official-looking geological surveys or financial statements, when in reality there is little or no current production. In one typical scenario, the promoter claims to have exclusive mining rights to profitable mines, but in actuality, the company does not have any mineral rights to the land or is defunct. In many instances, the amount of ore in the soil is so minuscule that extraction is not economically feasible.

In another typical scenario, the promoter, while touting a geology degree and decades of industry experience, points to a revolutionary process to extract precious metals from anything from volcanic cinders to sediment clay used to make kitty litter. Investors are encouraged to cash out of their poor performing investments and switch to the new, precious metals investment, which may be nothing more than "fool’s gold."

Read more about mining investments and what questions to ask before you invest.

The information provided on this website is not comprehensive, is not offered as legal or investment advice, and is not a substitute for competent legal or financial counsel. The Securities Division provides this information to give you an overview of the topics discussed. You should not rely on the accuracy of this information, but should carefully review all applicable statutes and regulations with the assistance of legal counsel.