Investing in the mining sector in an attempt to profit from the bull market in precious metals can be successful for those investors who understand the industry. Others may come up on the lucky side simply due to the overwhelming price advances of gold and silver.

In past precious metal markets, the mining company stocks have tended to move in the same direction of the underlying metals, but their volativity have far surpassed that of the metals – sometimes causing exponential price fluctuations compared to the price changes in metals.

This is largely due to the fact that investments in miners are essentially investments in the stock market. Hence, they are vulnerable to anything affecting the general economy and can move in the opposite direction of the metals, depending on circumstances.

The mining stocks are particularly vulnerable to political climates and even environmentally-motivated uprisings in countries where the companies are mining. For example, Hugo Chavez announced that he is nationalizing Venezuela’s gold miners. And in Peru, after the latest round of elections, the newly elected president, Ollanta Humala, would definitely like to have a share of the miner industries’ profits in his country, but it isn’t clear if or how that may happen. Nevertheless, just the rumors of government intervention of any kind can send a stock down dramatically.

Between the threats of government intervention or increasing mining taxes and environmental concerns, one walks a tight rope in determining companies in which to invest.

On top of these factors, the investor must decide which market-cap range is the best area of investment.

• Large Cap (Market Capitalization in Billions of dollars & well established)
• Mid Cap (Market Capitalization in high Millions of dollars)
• Small Cap (Market Capitalization in low Millions or unestablished)

Large caps can be more stable, but not have much growth potential. In fact, most large caps depend on buying up small and mid caps in order to sustain growth. Some small caps can yield huge returns. But some are risky because they can run out of cash and go belly-up before any significant find is established. The trick is knowing which ones have the greatest potential.

So it is worth repeating…if the investor doesn’t know the industry, then perhaps a better label for the activity of investment would be gambling.

But there are knowledgeable people in the industry. And one way to take advantage of that knowledge is to invest in minor-related ETFs and Mutual Funds. These types of funds hold baskets of various stocks, chosen by the funds’ management.

Below is a table of some precious metal equities, but it should be noted that these are not recommendations – each investor should initiate his/her own investigations prior to making any investments. The table is provided for informational purposes only.

Disclaimer: The author either owns, has owned, or is contemplating owning the listings in this table.

Large Caps
AEM	Stock – AgniCo Eagle Mines Ltd
EGO	Stock – Eldorado Gold Corp
GG	Stock – Goldcorp
KGC	Stock – Kinross Gold Corp
PAAS	Stock – Pan American Silver Corp
SLW	Stock – Silver Wheaton Corp
SVM	Stock – Silvercorp Metals Inc
AUY	Stock – Yamana Gold Inc
TGLDX	Mutual Fund – Tocqueville Gold
USERX	Mutual Fund – U.S. Global Investors Gold & Precious Metals
UNWPX	Mutual Fund – U.S. Global Investors World Precious Minerals
GDX	ETF – Market Vectors Gold Miners
Mid & Small Caps
CA:AMM	Stock – Almaden Minerals Ltd
CA:BYV	Stock – Bayfield Ventures Corp
CA:CGT	Stock – Columbus Gold Corp
CA:EAS	Stock – East Asia Minerals
FSM	Stock – Fortuna Silver Mines
THM	Stock – International Tower Hill Mines Ltd
CA:TWD	Stock – Trade Winds Ventures Inc
XRA	Stock – Exeter Resource Corp
AG	Stock – First Majestic
GDXJ	ETF – Market Vectors Junior Gold Miners

But the relative ease and convenience of an ETF doesn’t necessarily mean they are safe investments. In fact, quite the opposite – they can be quite volatile. And since they are a derivative of the underlying asset or financial instruments, every investor should understand that the ETF does not yeild any ownership of anything but a share of stock. (It is not as if the underlying asset or financial instruments are being purchased.) At best, any ETF can only propose to have similar price-performance compared to the underlying instrument.

While it is true that some ETFs provide for the exchange of stock shares for the underlying assets, this option is closed to most investors simply due to the minimum number of shares necessary to execute such an option.

Any investor wishing to participate in the precious metals bull market by utilizing the ETF arena should understand that it is not the same thing as owning precious metals. Instead, it’s a paper asset and should be treated as such. It should also be realized that all ETFs are not managed the same, nor are they even structured the same. On top of that, given any specific ETF, there will always be varying opinions among different analysts regarding the validity and expected performance of that same ETF. As an example, here’s an article discussing and comparing some of the prospects of the GLD, SLV, PHYS and PSLV ETFs.

When it comes to ETFs based on precious metals, there are a variety of different types:

• Standard ‘bull’ ETFs linking the price of one share to the price of a specific amount of a precious metal. The price of the shares tend to move more or less in synch with the underlying metal’s price movements.
• Standard ‘bear’ ETFs also linking the price of one share to the price of a specific amount of a precious metal. Only the share price tends to move in the opposite direction of the metal. (The share price goes up if the price of the underlying metal goes down.)
• Leveraged ETFs seek to give double (or sometimes triple) exposure to share price movements of twice (or more) the amount of the underlying metal. Again, these can be either bull or bear type exposure. (Incidentally, these leveraged ETFs are becoming quite a concern to market regulators in Washington. A derivative of a derivative of the underlying asset doesn’t seem so friendly to free markets. This related article discusses the dangers of the derivatives market.)

Below are some of the more popular ETFs in the precious metals space. Please note that this list is not comprehensive and these are not recommendations, but provided for informational purposes only.