SANP Why invest in Santo stock The

SANP Why invest in Santo stock

The advantages of investing in gold stocks

Investing in gold exploration companies like Santo Mining has several advantages over owning physical gold. They include:

Leverage

Leverage multiplies corporate earnings, which increases the price of gold stock. How does this work? When the price of gold goes up, the cost of extracting it remains stable, making the company more profitable with each uptick. Also, proven reserves still in the ground become more profitable. The rule of thumb is that stock in gold exploration companies doubles as the percentage increases in the price of gold.

Logistics

Owning physical gold comes with challenges. It has to be securely stored—at an ongoing cost in many cases, and it is inconvenient to move in any significant quantity. A gold bar is a very lovely thing, but it is also a very heavy thing to carry in a briefcase. The transportation problem is only compounded by the use of a safe for home storage. It’s just plain hard to move more than several ounces at a time.

Secondly, because it is a physical asset, gold carries a relatively expansive commission when buying or selling the metal. The commission can range as high as 15 percent on both sides of the transaction. Bullion carries expensive commission. If you buy a piece of gold at $1,700 an ounce and sell it again at $2,500 an ounce, you can say goodbye to upwards of 30 percent of your profit, on top of the storage costs.

Liquidity

The other inconvenience of owning gold is liquidity. To convert gold into cash requires the intervention of a precious metal dealer. Depending on the quantity of gold you plan to convert, this transaction will require either several hours or several days, not to mention the physical transaction. This requires either an in-person appointment with the dealer or the hassle of securely packaging and insuring your gold for shipment.