(Following is the sixth in a series of article on gold by Chuck Cohen, a financial consultant and investor based in New York City.) Last week, I explained why junior and exploration gold-mining stocks will be spectacular investments in the impending 21st Century gold rush. I will discuss specific stocks in the weeks ahead, but first let's talk about how to accumulate them. Because juniors are quite different from other stocks, the best approach to building a portfolio is to stick with a game plan formulated in advance. For starters, you should look for stocks of companies that hold the most resources or have the greatest potential relative to their market capitalization. There are some companies that have a $10 million capitalization, with good results and the potential for one to three million ounces. If the price of gold were to rise to $1,500 or $2,000 next year, odds are excellent that such stocks would increase in value by five or ten times. Spread Your Risk Jay Taylor, one of the best and most successful stock pickers, recommends that you initially try to put five percent of your funds in a single stock. This is an excellent way to start. If you put too much in one or two stocks, your gains might be greater, but so will be your risk, and this could lead to emotional decisions. If one or more stocks go up a lot, you can sell some and put the proceeds into others that haven't moved. Remember, with most of these stocks, you are playing the odds, and some will soar while others will lag. It's okay to increase your position size if the results better your expectations, or if the company has bought a lot of contiguous property. This last point is usually a tip-off that management is very encouraged by what they are finding.
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