2012 Silver Q1 Market Trends and Outlook

After three quarters of declines, silver’s fortune changed as the metal posted gains for the first quarter (Q1) of 2012. Silver took off after the new year, rising to its highest level since September 22, 2011 on February 28, when it crossed the $37 mark. But leap day proved unlucky for the metal, and investors saw a sharp fall in prices. Though in US dollars silver managed to gain about 16 percent during Q1 2012, it is now marching to a different tune, calling into question whether that performance will be repeated in Q2.
Q1 2012 revealed that optimism in the silver market was largely based on expectations of loose monetary policy. The EU played its part in satisfying the market’s thirst for liquidity by announcing another long-term refinancing operation. That move, however, was not enough, as silver investors also want an injection of cash into the US economy.
The Federal Reserve has not announced whether or not there is further stimulus in store for the US, but the market has proven so desperate that silver prices have been pushed around during the quarter based on what investors have read between the lines of Chairman Ben Bernanke’s statements.
The most dramatic example of Bernanke’s impact on silver occurred on February 29, when his omission of stimulus suggestions prompted a dramatic leap day decline, a fall from which silver has yet to recover.
Macroeconomic influence
Throughout March, silver has been trapped in a struggle between the bears and the bulls. In addition to disappointment with US monetary policy, silver prices have shown sensitivity to macroeconomic news, with a particular focus on the EU, China, and the US.
The debt situation in the Euro bloc has the ability to promptly reignite fear among silver investors. The metal has shown a positive correlation to the euro: it appears that when crisis is on the brink of escalation – such as during Greek bailout negotiations – silver suffers, but when such worries subside and the euro strengthens, silver prices improve.
China, with its supersized silver appetite and manufacturing muscle, is also of great concern to silver investors. Suggestions that its economy is in for a hard landing are a source of pressure for silver, and with people less inclined to dismiss this possibility, the outlook for silver is growing gloomier.
Standard Bank identifies China as the most important consumer of metals, but notes that data flows continue to point to a slowing down of the most important components of commodity demand, including manufacturing. Standard Bank said it is cautious on China’s economic growth and doesn’t expect real strong commodity demand.
In the US the economic climate seems to be improving. The data flows there are increasingly supporting such optimism, though Bernanke has yet to stamp the economy with his vote of full confidence. Still, when positive reports are released they tend to put further downward pressure on silver.
If the US economy continues to improve, its currency will begin to look more attractive. As silver has a tendency to trade inversely to the dollar, the strengthening currency will likely intensify the pressure on the metal.
Q2 outlook
With no clear indication of a new cash injection, and potential economic troubles in key consumer regions suggesting a serious decline in industrial demand, silver investors appear to be growing increasingly skeptical.
These doubts have largely been reflected in the futures market, where net speculative interest for COMEX silver has fallen off dramatically, shedding nearly 530 tonnes. Indian futures markets have started to take cues from international trends and have seen recent weakness.
In March, investors starting selling off notable amounts of silver from their ETF holdings, though this past week over 22 tons were added. Still, the outlook for Q2 2012 is growing increasingly precarious, with the market looking for something from which to gain positive direction, but largely failing.
Standard Bank foresees silver declining near the $30 level and is patiently waiting for the fall. At that level, the bank sees value and potential for silver to reach $40, but not until Q3

8 Reasons Why Silver Is the Investment of the Decade

Before you sell, consider the following reasons for why silver may be the best investment of the decade:
1. Demand is not only up, but still rising. The US Mint in the months of January and February sold as many dollars of silver as they sold dollars of gold. The Chinese used to export 100 million ounces of silver – they now import 112 million ounces – and that’s in a market that’s a total of 800 million ounces, or a 20% shift in just Chinese demand.
2. Supply and Delivery Challenges for Physical Bullion. In a market that trades roughly 400 million (paper) ounces a day, when Sprott Asset Management was preparing to open their physical silver trust they had difficulty acquiring just 15 million ounces. Other evidence direct from the US Mint further solidifies this point. The Mint recently advised potential investors that it can longer coin the popular Silver American Eagle saying, “The United States Mint will resume production of American Eagle Silver Uncirculated Coins once sufficient inventories of silver bullion blanks can be acquired to meet market demand for all three American Eagle Silver Coin products.”
3. Technological demand for silver is increasing. In 2010 industrial production of silver was up 18% due to rising demand from the technology sector. Among other things, silver is increasingly being used in computers, cell phones, and solar panels. Health care, alternative and traditional, is another market segment that will see silver demand increase because of silver’s antibiotic properties. It’s already being used in bandages, clothing, and medical devices.
4. Silver is closing the margin on the gold-to-silver ratio. Historically, though not in recent decades, silver has traded at an average ratio of about 16-to-1. It is currently trading at about 40-to-1, and just recently was trading at nearly 70-to-1. If the historical ratio of gold to silver holds up, then if gold is priced at $1600 an ounce, silver would need to be trading at about $100. If gold were to trade at $3000 an ounce, a prediction made by several contrarian precious metals analysts, silver would trade at $300 if the gold-to-silver ratio returned to historical norms.
5. There is a silver shortage. We’ve already discussed the supply issues that many investors taking large deliveries may be experiencing. But, there is also a pricing disconnect occurring, that indicates supply problems, at least in the short-term, are prevalent. According to Sprott and other analysts, forward looking silver prices indicate that a silver shortage exists. The phenomenon of price “backwardation” is one way of being able to identify this. Though there are millions of ounces in the ground, backwardation can mean there is simply not enough of an asset available right now. Sprott, for example, says that when they purchased the aforementioned 15 million ounces of silver, some of it wasn’t even minted until two weeks after they made the purchase, suggesting that existing inventory is simply not available.
6. More (Paper) Money. As the US Federal Reserve and central banks around the world continue to deal with fiscal issues through monetary means, more and more paper currency hits the global marketplace. As a result, more money is chasing fewer goods, with silver being one of those goods. For the reasons above, as well as the fact that there is more money available, the price of silver will continue to “inflate,” just like other hard assets. Over the last 100 years, since the Federal Reserve was established, the US dollar has lose some 95% of its value. This is a long-term 100 year trend, and given the current policies of the Fed, which are no different than the policies of the last century, the US dollar will continue to depreciate.
7. Gold for Main Street. While an ounce of gold may cost $1500, silver is significantly cheaper, giving working individuals and families the ability to invest without having to spend this month’s mortgage on a coin. Silver is available in various weights and mintages, from one ounce government issue coins like silver eagles to one-hundred ounce poured bars from Johnson Matthey. In addition, for newer investors, though fake silver exists, the risk to the investor is much lower because of the price, and investors can choose US “junk silver” coins like pre-1965 half dollars, quarters and dimes for easily identifiable and tradeable instruments. With silver, anyone who has a desire to do so can become their own central bank.
8. Crisis. Inflation is often identified as the single biggest reason for why precious metals like gold and silver rise. However, this is not always the case. During the 1990′s, a period where inflation was anywhere from 1% to 6% annually, the price of gold and silver barely moved. There was simply no investor demand. One of the reasons for this may have been because during the 90′s, the US was experiencing a period of boom. It was the advent of the internet and the general mood was positive. Stocks were rising and were the primary investment vehicle of choice during the technology boom. Gold and silver took a back seat. After the technology crash and September 11th, however, sentiment changed. As boom times gave way to recession, precious metals rose. They continued to rise as governments, namely in the US, passed more restrictive laws on everything from personal liberty to capital investment. When countries start restricting freedoms, people tend to shift capital. Throughout the first decade of the 21st century, this may have been the primary reason for gold and silver’s powerful rise. After the collapse of 2008, more and more investors began to realize that crisis is upon us. The government, failing to mitigate the problem, and likely making it even worse, forced those in traditional investments into the safe haven historical assets of choice – gold and silver. Thus, while inflation may play a part in the rise of precious metals, it is the perception that government is unable to deal with crisis that has been the real driving force. As the economic crisis continues to deepen, civil unrest breaks out around the world, and citizens lose faith in their government’s ability to manage crisis, the prices of precious metals, the last vestige of monetary security, will continue to rise.

Gold Mutual Funds

Alternatives to Gold
There is no perfect substitute for holding real, physical gold bullion. However, for some investors, Krugerrands and gold bars just aren’t viable options. After all, a single ounce of gold is now worth over $1,500, and buying in increments of less than one ounce can be costly, as the cost of producing the coin or bar cuts into the amount invested in the actual metal. While silver is often recommended for those who cannot easily shell out $1,500+ on a regular basis, for those who will have no substitute for gold, ETFs, gold-mining stocks, and gold mutual funds are additional possibilities.
ETFs, or exchange-traded funds, buy actual gold for you and other investors. You buy shares of the fund just as you would a stock, and since its sole holding is gold bullion, the idea is that the price of the fund mimics the price of actual gold. However, some investors are skeptical of ETFs, charging that the funds do not really hold the gold they say they do, and that these funds are really just another tool for the manipulation of gold’s market price. Whether or not these charges are true, enough investors believe them to cause a serious disconnect between the funds’ share prices and the actual price of gold.
Gold-mining stocks are another alternative. Here, you can often get a leveraged play on gold, since many gold-mining stocks go up or down much faster than the price of the metal they mine. If you’re really bullish on gold, then buying an un-hedged gold-mining stock can be your best bet, although there are pitfalls to individual stock investing, to be sure. For instance, when buying just one gold-mining stock, you’re not only betting on gold, but on that company’s management, too. If the company makes a costly error in developing an unprofitable mine, for example, then you could see your investment fall in value even as gold rises.
This is why gold mutual funds are so attractive to the investor who either cannot buy physical gold, or who simply wants to take a shot on the leverage that gold-mining stocks can offer. With gold mutual funds, you get a variety of gold-mining stocks all at once, chosen and traded by professional managers—you diversify your holdings within the realm of gold-mining stocks, mitigating the company-specific risk that buying one, individual gold-mining stock brings with it.
Reasons to Buy Gold Mutual Funds
The biggest advantage of gold mutual funds is that, after your initial investment of typically $1,000 or $2,500, you can normally add small investments of $100 or less on a regular basis, at much lower transaction costs. If you were buying an individual stock, then you could count paying $7-15 per buy, and the smaller your buy, the greater this takes away from your eventual returns—not so with mutual funds. Instead, with funds you pay a “load,” which is not a flat fee but a percentage of your investment—and many funds are in fact “no-load” funds.
Another reason to buy gold mutual funds is if you have a 401(k) through your employer—especially if your employer matches a portion or all of your contribution. If you have an Individual Retirement Account (IRA), you should be able to make the account self-directed and thereby buy actual gold bullion to hold in the account. However, if you’re looking for the leverage that mining stocks can offer, or for some reason you can’t or won’t set up your IRA for bullion investing, then gold mutual funds are a great option for you, too.
One knock against gold is that it doesn’t produce interest or dividends—but gold mutual funds do. If you are a goldbug but want an investment that produces income, than gold mutual funds are an excellent option.
Drawbacks of Gold Mutual Funds
There is a flipside to every coin, and many of the advantages of gold mutual funds can also be viewed as disadvantages. First and foremost, gold mutual funds are notphysical gold—there is no substitute for holding actual bullion. Secondly, although individual transaction fees are low, the costs paid by the fund when buying and selling stocks is passed on to you, as are fees associated with the management of the fund itself. After all, these professional managers have to be paid—and so do their assistants, secretaries, etc. Luckily, most funds are large enough and have enough investors that these fees are rather minimal when spread across all of the fund’s shareholders.
Finally, you’ll have to be wary of taxes. Physical gold is not taxed, but when shares of stock are sold for a profit, this results in a taxable capital gain. Mutual funds pass on these capital gains to their shareholders who must then report them on their tax returns.
How to Evaluate a Gold Mutual Fund
When choosing a gold mutual fund to buy, there are several things to consider:
1-Year Performance: This shows the growth in an investment in the fund over the past fifty-two weeks. In our examples, the year ends April 21, 2011.
5-Year Performance: This show the total return you’d have if you invested five years ago—it is not the annual return, but the total return for the five-year period. Past performance is no guarantee of future results, but obviously, higher numbers in these first two categories generally mean a better-managed fund.
Yield: This is the dividend payment yield of the fund. If you’re looking for income, the higher the yield, the better.
Minimum Investment: Mutual funds have a minimum initial investment, after which, small, regular investments can normally be added. Minimum investments are normally no lower than $1,000, and can be much, much higher. The minimum investments for the funds examined here range from $1,000 to $10,000, although most are no higher than $2,500.
Load: As stated earlier, a “load” is a percentage-based transaction fee. If the fund’s load is 5.75%, and you invest $1,000 in the fund, then $57.50 will be deducted from your investment as a transaction fee, leaving $942.50 to be invested. This may seem like a high fee, but when you consider the fact that you’re actually buying many stocks at once, which are then actively traded at no direct expense to you, it’s not so bad. Furthermore, if you make small investments in the future, the transaction costs are much smaller, since instead of being a flat $7-15, they’re a percentage of your investment. A $50 investment, for instance, would have a transaction cost of less than $3. However, it should be noted that there are no-loadfunds, and studies have found there is little to no correlation between fund performance and load size.
Expenses: These are the total expenses of the fund, expressed as a percentage. These expenses include all of the management fees as well as the transaction costs associated with the actual buying and selling of shares within the fund. You might think that low expenses were better, but then again, you get what you pay for, right? Actually, you should trust your first instinct in this case, as studies have found that when expenses are included in performance calculations, low-expense funds outperform high-expense funds, on average. There are always exceptions, of course.
Assets: This refers to the total size of the fund. Is bigger better? Not necessarily. Smaller funds can be more swift and agile in moving in and out of stocks, but bigger funds have greater economies of scale. It is a trade-off, and no one can say which is definitively better, but the size of a fund is something to take into consideration.
Turnover: This statistic shows how much of the fund’s portfolio is “turned over” each year. A high turnover ratio means that the fund changes a lot over time, with active trading by management. A low turnover indicates little trading; a more stable, conservative approach. Which is better? It really is up to the individual investor’s taste, but the statistic is worth noting.
With all this in mind, here are eight gold mutual funds I’ve identified as friendly for individual investors (as opposed to institutions), with reasonably small minimum investment requirements. All of these funds are open to new investors. I’ve rated them based on a formula taking into consideration their one- and five-year returns, their yields, and their loads and expenses.
1. Van Eck Intl Investors Gold A (Ticker: INIVX)
• 1-Year Return: 38.4%
• 5-Year Return: 129.4%
• Yield: 8.02%
• Minimum Investment: $1,000
• Load: 5.75%
• Expenses: 1.25%
• Assets: $1.8 billion
• Turnover: 33%
2. Oppenheimer Gold & Special Minerals A (Ticker: OPGSX)
• 1-Year Return: 40.5%
• 5-Year Return: 121.4%
• Yield: 9.14%
• Minimum Investment: $1,000
• Load: 5.75%
• Expenses: 1.06%
• Assets: $5.2 billion
• Turnover: 16%
3. Franklin Gold and Precious Metals A (Ticker: FKRCX)
• 1-Year Return: 32.4%
• 5-Year Return: 113%
• Yield: 10.93%
• Minimum Investment: $1,000
• Load: 5.75%
• Expenses: 0.95%
• Assets: $4 billion
• Turnover: 17.6%
4. Invesco Gold & Precious Metals Investr (Ticker: FGLDX)
• 1-Year Return: 36.2%
• 5-Year Return: 89.1%
• Yield: 3.01%
• Minimum Investment: $1,000
• Load: None.
• Expenses: 1.29%
• Assets: $694.4 million
• Turnover: 2%
5. Fidelity Select Gold (Ticker: FSAGX)
• 1-Year Return: 31.1%
• 5-Year Return: 79.5%
• Yield: 0%
• Minimum Investment: $2,500
• Load: None.
• Expenses: 0.94%
• Assets: $4.7 billion
• Turnover: 46%
6. First Eagle Gold A (Ticker: SGGDX)
• 1-Year Return: 33.5%
• 5-Year Return: 92.5%
• Yield: 2.08%
• Minimum Investment: $2,500
• Load: 5%
• Expenses: 1.22%
• Assets: $3.6 billion
• Turnover: 5.5%
7. Vanguard Precious Metals and Mining Inv (Ticker: VGPMX)
• 1-Year Return: 33.3%
• 5-Year Return: 48.7%
• Yield: 4.24%
• Minimum Investment: $10,000
• Load: None.
• Expenses: 0.27%
• Assets: $5.5 billion
• Turnover: 34%
8. American Century Global Gold A (Ticker: ACGGX)
• 1-Year Return: 37.7%
• 5-Year Return: 61.4%
• Yield: 5.63%
• Minimum Investment: $2,500
• Load: 5.75%
• Expenses: 0.94%
• Assets: $1.3 billion
• Turnover: 24%

Silver Investing Options

Silver is often referred to as “the poor man’s gold” because it is relatively cheap in comparison to gold, making it a much more viable investment option for many people.
Several options available for those interested in investing in silver are discussed below:
Physical Silver
Physical silver in the forms of coins, bars and rounds is a popular form of investment.
Coins
Silver coins may be purchased directly from brokers or websites. Today’s silver proof coins are typically 99.99% pure. However, many prefer traditional U.S. silver coinage such as Morgan and Peace Silver Dollars, Walking Liberty Half Dollars, silver quarters issued before 1965, and silver Mercury Dimes. Other popular coins include the 99.99% pure Canadian Silver Maple Leaf.
Advantages:
Relatively inexpensive
       Small, easy to store, easy to transport
Instant convertibility into cash
Internationally negotiable
Disadvantages:
Must be stored securely
Yields no interest
Premium over bar prices
Bars
The most traditional form of silver investment, bars are available in a wide range of sizes from one troy ounce of 99.99% pure silver to 1000 troy ounces. There are several private silver mints and silver bars may be purchased directly from them. Silver bars can also be bought and sold over the counter at major banks in countries such as Switzerland.
Advantages:
Least expensive of the physical silver forms
Convertible into cash
Internationally negotiable
Disadvantages:
Must be stored securely
Possible need for assay at time of sale
Yields no interest
Rounds
Silver rounds are a cross between bars and coins. They are produced by numerous mints and usually contain an ounce of silver in the shape of a coin without the status of legal tender. You may order rounds with a custom design or in assorted batches.

Silver Exchange Traded Funds
ETF’s offer investors a simple way to buy silver shares in a trust that owns physical silver. Silver ETF’s are backed by physical silver and include: iShares Silver Trust(NYSE:SLV), Central Fund of Canada (TSX: CEF.NV.A, NYSE: CEF), ETFS Silver(LSE: SLVR), and ETFS Physical Silver (LSE: PHAG).
Advantages:
Exposure to physical silver market without the inconvenience of storage
Have major exchange listings and trade like equities
Disadvantages:
Unpredictable market price changes

Silver Mutual Funds
Several mutual funds specialize in silver by investing in silver mining stocks or in silver directly.
Advantages:
Offer investment programs in silver and other precious metals
Diversified holdings among dozens of companies
Disadvantages:
More expensive than investing in physical silver
Requires knowledge of equity market

Silver Mining Stocks
Rather than investing in silver directly, you may purchase share in companies that mine silver directly or indirectly. Only about one third of newly mined silver every year is produced from primarily silver mines. The rest is a byproduct of other base and precious metal mines, so you need not only invest in silver mines to profit from rising silver prices. Investors may choose to directly purchase shares in a mining company or mitigate their risk by investing in mining mutual funds.
Advantages:
Offers capital appreciation opportunities
May yield a dividend.
Disadvantages:
Requires a greater investment than in physical silver
Requires knowledge of equity market
More risk involved than in most other types of silver investment

Silver Certificates
Holding silver certificates of ownership for physical silver allows investors to buy and sell silver without actually having to transfer the actual silver. For further information, look into the Perth Mint Certificate Program (PMCP, which is the only government-guaranteed silver-certificate program in the world.
Advantages:
High liquidity at competitive prices
No storage risk
No sales tax
Prices widely quoted
Disadvantages:
Several days delay in delivery
Silver not in owner’s physical possession

Silver Accounts
Investors can instantly buy or sell silver electronically through silver accounts offered by most Swiss banks. These accounts are either backed through unallocated or allocated silver storage. The investor does not own the actual silver. They have a claim against the bank for a certain quantity. You can set up silver accounts through a variety of electronic services such as eLibertyDollar, e-gold, and GoldMoney.
Advantages:
High liquidity at competitive prices
No storage risk
No sales tax
Prices widely quoted
Disadvantages:
Several days delay in delivery
Silver not in owner’s physical possession
Silver Futures
Silver futures trade on various exchanges worldwide, such as on COMEX, which serves as a world reference for silver prices, in the U.S. and NCDEX in India. They offer an opportunity for those investors adept at correctly anticipating price changes. Investors trade anonymously through futures brokers. Silver futures contracts are commitments from traders to make or accept delivery of a specified quantity or quality during a specific month at an agreed upon price. Yearly, only about 1% of silver futures contracts actually result in delivery because traders usually offset their positions before the contract matures. Profit or loss is determined by the difference between the initial purchase price and the price at the time of the offsetting transaction.
Advantages:
Speculative appeal
Leverage reduces capital tie-up
Liquidity
Contracts widely quoted
No storage risk
Disadvantages:
Many trading limitations.
High risk factors
Unlimited loss potential
Requires market expertise

Silver Mining in Canada

Trade in natural resources is the lifeblood of the Canadian economy, making the mining industry crucial to the nation’s survival. Each one of Canada’s ten provinces and three territories is home to a number of mining operations, and nearly 80 percent of total mineral production is exported. The North American nation is amongst the top world-leading producers of uranium, zinc, potash,nickel, molybdenum, and gold. However, in terms of silver production, Canada ranks 11th with 19.6 million ounces produced in 2009, according to the Silver Institute.
While global silver mine production rose by nearly 4 percent in 2009, its seventh straight annual gain, Canada posted a loss of more than 1 million ounces, says the Institute. Canada’s lack of primary silver mines may be responsible for its lower ranking as primary silver supply accounted for 30 percent of total global mine production last year.
Most mined silver is a by-product from other metal mines, and silver production in Canada fits that description. According to Natural Resources Canada (NRC), the nation’s mines are primarily polymetallic; so, it’s no surprise that the main sources of silver in Canada are copper-zinc, copper-nickel, gold, and lead-zinc ores.
NRC research shows that in 2008, the majority of silver mine reserves were held mostly in copper-zinc ore (55 percent); other sources include gold and silver ore (23 percent), lead-zinc ore (18 percent) and nickel-copper ore (4 percent).
Despite the nation’s lower rank, the silver mining industry played a significant role in the settlement of Canada. The country’s most notable silver rushes occurred in Cobalt, Ontario and the Kootenay region of British Columbia, still known today for its wealth of precious metals.
Silver Mining by Province/Territory
As of December 2008, according to the NRC, the provinces of Ontario, British Columbia, Quebec and New Brunswick continue to dominate in terms of proven and probable mineable silver reserves in Canada. Quebec is the leader with 29 percent, followed by Ontario with 24 percent, New Brunswick  with 18 percent and British Columbia with 16 percent.
On average, Canada produces over 1000 tonnes of silver annually. The NRC reports that in 2009, New Brunswick produced 184 tonnes of silver; the province of Quebec produced 155 tonnes; Ontario was responsible for 138 tonnes; and British Columbia produced 74 tonnes of silver.
The province of British Columbia, and the territories of Nunavut and the Yukon have become hot beds for resource exploration and development projects with several companies on the hunt for the next silver find.
Not only is BC the corporate base for many Canadian mining firms, it’s also a major producer of base and precious metals with a long history of silver mining. In production from 1909 to 2001, the Sullivan lead-zinc-silver mine was once one of the world’s largest producing mines with an estimated total silver production of 280 million ounces. Barrick Gold’s (NYSE:ABX; TSE:ABX) Eskay Creek mine, which operated from 1995 to 2008, was one of North America’s highest-grade gold and silver deposits with annual silver production of 15.5 million ounces.
Silver Standard Resources Inc. (NASDAQ:SSRI; TSE:SSO), which claims to have “the largest in-ground silver resource of any publicly-traded primary silver company,” has its flagship mine in Argentina. The Pirquitas mine is expected to be one of the largest open pit primary silver mines in the world. However, the company does have two advanced exploration projects in BC. It’s wholly-owned Snowfield and Brucejack projects are a part of a mineralized gold-copper-silver-molybdenum system.
The Snowfield project lies immediately east of Seabridge Gold’s (TSE:SEA; AMEX:SA) KSM property. As of December 2009, estimated resources at Snowfield include measured and indicated gold resources totaling 19.8 million ounces and silver resources totaling 50.9 million ounces; inferred gold resources total 10.1 ounces with inferred silver resources totaling 43.7 million ounces.
The Brucejack project is about six kilometers to the south of Snowfield. As of December 2009, estimated resources consist of measured and indicated resources of 4.04 million ounces of gold and 65.4 million ounces of silver with inferred resources of 4.9 million ounces of gold and 71.5 million ounces of silver.
Other companies with properties under exploration for silver resources in BC includeSilver Quest Resources Ltd. (CVE:SQI), Huldra Silver Inc. (CVE:HAD), Silvercorp Metals Inc. (NYSE:SVM; AMEX:SVM; TSE:SVM), Bard Ventures (CVE:CBS), and Avino Silver and Gold Mines (CVE:ASM).
Nunavut and the Yukon Territories
Metals and minerals prices took a hard hit in 2008, and “had a devastating impact on mining production and exploration across Canada,” commented the Conference Board of Canada in an August 2010 report. However, the Conference Board presented an optimistic 2010 economic outlook for the nation’s territories, forecasting “strong economic growth this year,” due in large part to a recovering demand for diamonds, precious metals and other resources.
While Canada’s territories don’t come close to the annual silver production posted by the provinces, they are quickly becoming centers of new exploration, especially in Nunavut and the Yukon.
In Nunavut, “a rejuvenated mining industry” will help the province “post real GDP growth of 12.9% this year” with  “mining and exploration and deposit appraisal expenditures . . .  expected to increase to Cdn$238.3 million” in 2010, reports Mineweb’s Dorothy Kosich.
Nunavut is home to Sabina Gold & Silver’s (TSE:SBB) flagship properties, the Hackett River silver-zinc project and the Back River gold project, which are both advanced exploration properties.
Advancing the Hackett River project is amongst the company’s top three mandates. The property, says a recent Sabina news release, is one of the world’s largest undeveloped silver-zinc volcanic massive sulphide deposits “with indicated resources totaling 43.6 million tonnes with diluted (recovery) grades of 4.15% zinc, 129 g/t silver, 0.35% copper, 0.58% lead and 0.27 g/t gold . . .  [and] inferred open resources totaling 16.0 million tonnes with diluted (recovery) grades of 3.53% zinc, 111 g/t silver, 0.24% copper, 0.46% lead and 0.25 g/t gold.”
Commenting on the company’s successes and financial results for the second quarter 2010, Sabina President & CEO Tony Walsh credited progress at the Nunavut projects. “The first half of 2010 has been both productive and exciting for us,” said Walsh. “Successes at our Nunavut projects have enabled us to access equity markets with a strong share price allowing us to fund our aggressive plans for Back River and Hackett River going forward. We are very pleased with the successes we’ve had to date, especially with the new discoveries at Back River.”
Another company eying potential silver targets in Nunavut includes Aura Silver Resources (CVE:AUU). Aura’s flagship property, the Taviche project, is located in Oaxaca, Mexico; but its second silver project, Greyhound Lake, is found in Nunavut.
The Conference Board of Canada says the Yukon Territory leads all provinces and the other territories in economic growth for 2009, posting a 1.4 percent increase. The Conference Board expects the Yukon’s GDP to rise by 4.9 percent in 2010. Real output from the territory’s mining sector is expected to grow by about 60 percent this year to C$115 million.
As of December 2008, the Yukon held a mere 1 percent of proven and probable mineable silver reserves in the nation, producing 10 tonnes of silver in 2009. But those numbers could improve dramatically with the opening in 2010 of what will be Canada’s sole producing primary silver mine.
Alexco Resource Corp.’s (TSE:AXR; AMEX:AXU) Bellekeno silver mine, under construction since November 2009, is located within the historic Keno Hill Silver District, which produced more than 217 million ounces of silver between 1913 and 1989.
The deposit is comprised of polymetallic silver, lead and zinc vein-type mineralization with 401,000 tonnes of indicated resources graded at 921g/t silver, 9.4 percent lead and 6.5 percent zinc. Inferred resources are estimated at 82,981 tonnes graded at 289g/t silver, 2.8 percent lead and 22.2 percent zinc.
Bellekeno is expected to produce up to 2.8 million ounces of silver per year with a mine life of 3.5 years; however, exploration targets are anticipated to extend mine life while increasing annual production to 5 million ounces.
Other companies with silver targets in the Yukon include Klondike Silver Corp.(CVE:KS), Silver Quest Resources (CVE:SQI), Habenero Resources (CVE:HAO), andTarsis Resources (CVE:TCC).

Silver Mutual Funds Offer Another Option for Investors

There are numerous ways to invest in precious metals these days. Bullion and rare coins have always been investment options, and they’re still good ones. Gold and silver certificates and privately minted coins are some other choices. And there are also mutual funds that can offer you exposure to the precious-metals sector.
There are about thirty mutual funds which invest in both gold and silver. But as you will see, the investment styles and strategies of these funds vary greatly. Some invest primarily in mining stocks, while others hold bullion or coins. Still others offer a balanced approach. And finally, there are the exchange-traded index funds tied directly to the bullion price of gold and silver. One thing is for sure—it’s never been easier to invest in precious metals.
Two of the Best Precious-Metals Funds
Two of the best precious-metals mutual funds are Vanguard Precious Metals and Mining (ticker: VGPMX) and Permanent Portfolio (PRPFX). Both of these funds received five-star ratings from Morningstar, and yet they are quite different.
The Vanguard Fund is heavily stock-based mutual fund. As of July 31, 2007, 97% of its $4 billion in assets were invested in equities, with its largest holdings Lonmin (LMI), Impala Platinum (IMPUY), Anglo Platinum (AGPPY), and Aber Diamond Corporation (ABZ). All four of these stocks are foreign and can only be purchased by U.S. investors through ADRs—buying the fund is much easier.
As of July 31, 2007, Vanguard Precious Metals and Mining had a one-year annualized return of 22.29%. Its three-year return was even better, at 39.88%. And its five-year return was 34.01%. An investment of $10,000 five years ago would be worth $43,220 today.
Another amazing feature about the Vanguard Fund is its incredible Sharpe Ratio of 1.41 (five-year return over risk). In fact, based on the fund’s three-year, five-year, and ten-year data, Morningstar assigned it a return designation of “high,” and a risk designation of “low.”
Permanent Portfolio (PRPFX) didn’t fare quite as well. Its three-year, five-year, and ten-year returns are designated as “high,” but it’s risk is also “high” or “above average.” What’s more, its returns haven’t been as high as Vanguard’s—just 8.1%, 11.75%, and 13.06% for one, three, and five years, respectively.
But Permanent stands out when you look at its worst returns. In its history as a fund, the worst three-month period it has ever experienced is -5.58%. By comparison, Vanguard shareholders would have suffered a -29.8% three-month period if they held the fund long enough.
Remember, the Vanguard Fund is 97% stocks. Permanent Portfolio, by stark contrast, is much more well balanced. As of July 31, 2007, it was 23% in cash, 32% in stocks, 21% in bonds, and 24% in “other”—which, as you might guess, means mostly precious metals. In fact, its four largest holdings are U.S. Golden Eagles, Gold Canadian Maple Leafs, COMEX Gold, and COMEX Silver.
It’s easy enough to look at these two funds and say Vanguard is superior, but it really depends on what you want as an investor. Do you want a well-managed mining-company fund, or do you want a mutual fund that gives you real exposure to gold and silver? If the answer is the latter, than Permanent Portfolio is your best bet.
One Not-So-Good Fund
Of the thirty gold and silver funds, only two received a five-star rating. Three others received four stars, and all the rest but one were either given three stars or weren’t rated. There was just one two-star fund: RiverSource Precious Metals & Mining.
Like the Vanguard Fund, RiverSource is predominantly stock-based. As of July 31, it had 96% of its $120 million invested in equities, more than half of which were foreign securities. Unfortunately, its selections haven’t panned out as well as Vanguard’s, with only a 7.06% year-to-date return.
Another negative aspect of RiverSource is its ultra-high expense ratio of 2.15%. By comparison, Vanguard has an expense ratio of just 0.35% and Permanent Portfolio’s is just 1.11%. Both of the five-star funds are no-load, whereas RiverSource has a 1% back-end load. All of these fees and expenses can really take a bite out of your returns, especially when the fund’s performance isn’t all that hot to begin with!
Exchange-Traded Funds
Finally, there are exchange-traded funds (ETFs) that allow investors a more direct access-point to gold and silver. For gold, there is streetTRACKS Gold (ticker: GLD), and for silver, there is iShares Silver Trust (SLV). Both of these funds are tied directly to the price of their corresponding precious metal, and invest in nothing other than gold and silver, respectively.
For example, streetTRACKS Gold is priced so that one share of the fund is equal to 1/10 an ounce of gold. The iShares Silver Trust is priced so that one share equals ten ounces of silver. However, these ratios don’t always hold up—GLD recently traded for $66.57 a share while gold was $670 an ounce; and SLV traded at $127.65 while silver was priced at $12.79. Nevertheless, these ETFs do give investors an easy way to own gold or silver, at least on paper.
It’s As Easy as Point and Click
So what is the best way to invest in precious metals? It’s really up to you—your preferences and investment goals. The only thing you must be sure of is if your strategy matches your investment objectives. For example, if you want real exposure to gold and silver, it’s much better to purchase Permanent Portfolio than the Vanguard Fund—but even better yet to buy GLD and/or SLV.
But if maximum exposure isn’t your goal, the Vanguard Fund could be a great investment. The best news is there are dozens of options which simply didn’t exist ten or twenty years ago. Now, with nothing more than a few hundred dollars and Internet access, anyone can hedge with and profit from precious metals.

Basic Stock Investing Rules

What Is Investing?
Investing is one way that people put their money to work to make more money. Investing in the stock market requires a sound stock market investing strategy. The focus of stock investing is on the return. Stock market investing can be either conservative or aggressive depending on what your prefer to do. The best stock market investing advice is to always weight the expected return against the risks that may be involved. However, before you get started you should know the basics of stock market investing. The first thing to learn is the types of stocks that are available.

Basic Stock Information

Types of Stocks

Understanding the type of stock options you have is the first step in understanding stock marketing investing. The two main types of stock are common stock and preferred stock. Common stock is what the majority of the public holds as individuals. Most of the information you hear about stocks being up or down has to do with common stocks.

Aside from dividends, preferred stock actually has less rights than you get with common stocks. Companies that have preferred stock will usually get first call on the dividends ahead of common stock which means they are able to pay consistent dividends. Many investors will purchase preferred stock. Next you should consider the methods of trading stock.

Basic Stock Trading Information


Ways to Trade Stock

You always hear of stock investing, but what exactly goes into investing in stock market trading. Trading in stock investing is basically the same as buying and selling although there is a little more to it. Stock market investing has two main methods of trading, on the exchange floor and electronically.

When it comes to stock market investing most people think of the trading floor at the New York Stock Exchange or NYSE. This process involves individuals actively trading stock on the stock exchange floor and within a few minutes to an hour you will get a call from your broker regarding the amount of your trade.

Another option that is available for stock investing is the electronic method. The NASDAQ system is entirely electronic while the NYSE one have a small percentage of their stock market investing done online. Electronic stock investing is quickly becoming a popular stock market investing strategy. Rather than human brokers with the exchange floor method, electronic stock investing uses a large computer network to match up sellers with buyers. Many prefer this method since it is both efficient and fast when it comes to stock market investing. The company traders who are investing in pension funds, mutual funds and other stocks prefer this investment method.
Stock Trading Methods And Stock Investing Advice

However, the individual stock investor also has benefits with the electronic method. The electronic method allows individuals to get almost instant confirmation on their stock market investing and get stock market investing advice. Although the electronic process doesn't mean you can get rid of your broker. A broker is still required to gain access to the electronic markets. Once you have invested in the stock market then how can you help protect your investments?

Protecting Investments


How to Protect Your Stock Investments

It is very important that you have a rational approach to your stock investing others all you investing in the stock market could be lost. Misreadings and mistakes are the two quickest ways that you can looking when investing in the stock market. Not only should you be able to avoid making these errors, but it is a good idea to protect your portfolio.

The best stock market investing advice when it comes to protecting your investments is to limit your adverse stock losses as much as possible. The key to limiting your losses is having a disciplined stock market investing strategy. In order to do this you should have a system for understanding your mistakes so you can learn from them and protect your stock investing in the future.

Along these lines it is a good idea to avoid taking too many risks when investing in the stock market. While you need to take risks in stock market investing, it is wise to calculate your risks and only take those that are in relation to your potential returns. You should take a look at your returns and find a risk limit that you are willing to stick with during your stock market investing.

Once you set a risk limit it is best to stick with it. Once you go past this limit it will start an out of control spiral that can disastrously affect your stock investing and your portfolio. Finding you limit is very easy, just pay attention to your gut feelings when making your investments.

Never jump into an investment. Even if it seems like a good deal at the time. Always make sure you do your research first and thoroughly understanding what you are investing in before making a trade. A good deal will always be available, but you don't want to get stuck in a bad deal with no way out and a bad effect on your stock investing. Investing in the stock market can be a difficult process, but as long as you know the basics of stock market investing and don't take too many risks you won't have a problem. Once you get used to the investing process and stay within your limits you will have a sound stock market investing strategy that you can use for all your stock investing needs.

Gold investment for assured returns

The shimmering and glistening metal that is gold has been hunted for, fought over and stolen. The demand and the popularity that gold enjoys is something that cannot be denied and its demand seems to be rising every day. One does not need trade analysts to understand that investment in gold will only increase as it hasn't seen a decline in a long time. This has prompted many people into attempting gold investment to ensure returns after a period of time.

There are many gold investment options that one can explore to find out the best gold investment option. Gold investment for beginners should include the purchase of hard gold in the form of gold coins or gold biscuits. As the value of this gold is set to only increase over time the money spent will be well spent as the price of gold will continue to increase.

Gold investment options for beginners that includes the purchase of hard gold is the best gold investment as this form of investment gives one hard gold that one can keep and one that a person truly and completely can call his/her own. This is far better than gold investment on stocks, as a person will only own certain percentage of shares in such investment measures and never really possess the gold. Whereas in hard gold investment, the gold is purchased and owned by the person for posterity or till time comes to sell it and make a huge profit. This is the best form of gold investment for beginners who would like to invest in gold.

Other gold investment opportunities include investment in gold ETF, Exchange traded funds are similar to mutual funds so they hold the same risks that mutual funds do. Gold investment in gold ETF is an option that may be considered by people who wish to keep their investments for a long period of time. The investment in ETF should be to get the maximum benefits and the longer the period of investment the more the money one would make. When investing in ETF it should be remembered that the investment should be made after complete knowledge about what one is investing in. In gold ETF scheme, one can be sure that the value of gold is set to increase and so such a gold investment scheme would be a very good investment indeed.

An advice on gold investment for beginners is that the investment on gold should be immediate. The minute you decide that gold investment is what you would like to do then there is no point in delaying any further. Gold price fluctuate everyday with many days seeing very high prices. Therefore delaying before investing in gold should be avoided as the price will get much higher than what it was when you first thought of buying it.

The next step in gold investment is actually buying the gold. Buying gold investment or gold in the form of coins and biscuits should be carried out at a jewellery store or a pawn broker in your locality. There are many jewellery stores that provide gold coins and these can be used as an investment.

Many people who leaf through gold investment opportunities worry that they might not be able to sell the gold at a later stage. Who will buy their gold? The answer is that many people would want the gold if you are willing to sell it. Many jewellery stores will be interested in buying gold biscuits or coins as they would be able to use it. In most cases, money will be provided immediately so this form of investment assures liquidity almost immediately. This is a far cry from other forms of investment, where to get liquidity one has to wait till the period is right to sell it.

The Gold bars and coins that are invested on are investment grade qualities ranging from 0.90 till 0.9999. These coins can be used for gold investment as these are of a very high quality and will fetch the necessary returns. Other coins that are used for gold investment include numismatic gold coins where the value of the gold coins are not only restricted to the value of the metal that is used but also for the historical significance associated with these gold coins.

Gold investment should be carried out by almost anyone who can afford them. There is a common misconception that gold investment is for people who cannot afford anything bigger. This is horribly untrue as many gold investors are affluent and enjoy very good positions in the society.

Most trade analysts insist that buying gold investment is the best form of investment that everyone should get into as the investment is sure to rise even higher. There are many who suggest that at least 10% of one's assets should be invested in gold while there are others who suggest that the figure should go up even higher. Gold investments are, currently, one of the best forms of investments that one should invest on. This form of investment should be carried out immediately and without delay to increase the purchase and to prevent the price rise from affecting the amount of gold that one can hope to buy.

Investment Risks - Too Many to Ignore

A professional investor may say you that the main inconvenient of investment risks is that they are risky. But that obvious remark entails much more than you may suspect. Because it isn't only a matter of how much money you may win or lose.

You have to consider the amount of time that you have spent doing the research. The other option is to leave that responsibility to an investment dealer; risks are part of their daily chores, so it no novelty for them to incur in these proceedings.

So, should you embrace investment risks? Are they really worth it or are nothing but a scam created by con artist who are looking for easy preys? Let's find out more about risks on return on investments plans and if they really worth your precious time and your hard earned money.

What Is An Investment Risk?

There are two types of investments. Riskless and risky. Riskless investments are guaranteed by a reputable organization. It can be a private corporation, a government agency or a supra national organism. In any of those cases, you know that there will be no problem when it is time of receiving your money, plus interests, back.

A perfect example of an almost riskless investment is a bond emitted by a government or a Fortune 500 corporation. On the other hand, there are risky investments. In this type of risks, there is a bigger chance to make a lot of money, but also there is a bigger chance to lose it.

There are degrees of risks in investment. For example, foreign investment risks can be more risky than personal investment risks. At the end, the degree of risk is determined by the variables that it has to live with. And they can be as diverse as a new competitor to changes in the geopolitical situation in southeast Asia.
Types Of Investment Dealer Risk

There are three types of risk that need to be evaluated by any person who wishes to determine if the risk is worth your money. The first one is business risk. This type of risk is relatively popular, so almost all the public knows about it.

All companies have different levels of competition. It can be direct, or indirect, but at the end, they are trying to grab a piece of the scarce resources that are available in the market. For example, a gourmet restaurant has to offer enough value to compete with a car dealer. Why? Because someone who buys a car may have to adjust a bit in order to pay for it. That means that certain luxuries, like a dinner at a fine restaurant, will be sacrificed.

But competition isn't the only variable that affects business investment risks. There are also the events that happen around the world. Due to the terrorist attacks of September 11, many of the domestic airlines lost enormous amounts of money that. Another variable is the economic measures taken by the governments. If a government decides to increase taxes, the solvency of the company will be compromised.

After business risk, comes valuation risk. This isn't widely known among the public, but it is considered of great importance among investors. Why? Because by valuating the company and it's operation, you will be able to determine if it is worth the time. One example is Google. The company is great, just bought YouTube and has interesting numbers. But the share is way beyond what it should really cost.

In this type of cases, you may be facing a complicated decision. Will the stock raise even more or may it fall down after the bubble blows up? The only way to do it is to valuate the company and determine if it is really a good investment.

The third type of risk is the force of sales risk. It means that you may own a great stock, but, when are you going to be able to sell it? Will you have to wait ten years until you can see your money back? What if you need that money for the college of your kids or for treating a disease? As you can see, the disposition of your money is as important as the value of the company and the variables that affect it.

Beware Of The Crooks 

Unfortunately, the investment community isn't free of con artists, scammers and professionals of deceit. There are many people and pseudo-organizations that look for investors that are unaware of the realities of the market. How can you identify them? It is pretty easy.

One of their typical tactics is to tell the public that they can make anyone rich. It can be an investment scheme, a book, an e-book or even a video. The reality is that none of those strategies really work. They will show you numbers, tables, sheets or even testimonies of previous clients. But the thing is that in investment, there isn't something as a "quick buck", even with risky investments.

The typical places at which they post their ads are internet web pages with dubious content (for example, a page that uses Google Ad's for supporting itself. If they are so successful, why do they need that source of revenue?), late night TV ads (also known as infomercials), spam (it can be in your mail or in your e-mail), and ads at unprofessional newspapers or magazines.

An investment dealer risks the money of their clients, but if he is a professional, he will do it with a reason, based on it's knowledge and experience, not in ideas or feelings. Investment risks can be an interesting way to invest your money, but, you must be careful. There is a lot of research to do in that field.

Foreclosed Investments - How to Beat Your Competitors?

Due to the huge real estate bubble that is crossing all America, investing in foreclosed homes has become a new fad among investors who are looking for bargains in the market. After all, if you consider the millions of houses, apartments or any kind of properties that are bought and sold in the US, no wonder then that investing foreclosed real estate has become so popular.

But what is a foreclosed home? Are they really an interesting investment opportunity, or it is just a fad that will dissipate with time? Although there are some situations in which a foreclosed home won't adjust to your needs, in can become an interesting way to invest your money.

What Is A Foreclosure?

A foreclosure is the name assigned to a legal proceeding, under which a creditor sells or repossess a property. The only way that a loaner can execute a foreclosure is when the borrower is unable to pay the debt agreement. This debt agreement could have been a typical mortgage or a deed of trust.

The problem with foreclosure is that it varies from state to state. That's why it is considered that there are two main types of foreclosure. The common and the uncommon one. In the first one, when someone stops paying his mortgage monthly quotas, the credit institution, which can be a bank, will claim the title of the property. This is done for repaying the remaining debt. The property is then auctioned by the local sheriff and sold to the highest bidder.

In the case of the uncommon foreclosure, the creditor will go directly to a public auction. And, as in the previous case, the highest bidder becomes the new owner of the property. It must be mentioned that in both cases, the new owner won't have to pay any remaining debts or interests left behind by the original owner.
Should You Invest In A Foreclosed Home?

There is no straight answer for this question since it depends on the situation. If you need a property to live in as soon as possible, then it isn't your best option. Investing in foreclosed home property entails a commitment that many people aren't able or willing to do. Why? Because it takes time.

An experienced foreclosed investor will tell you that, at least, you will need to invest 40 hours for a couple of months for finding the correct house. Of course, you will be able to save thousands of dollars in your new property, but it won't be easy. Investing in foreclosed homes requires spending most of the time with your computer, navigating through the net and checking the newspaper for local auctions.

Additionally, you must be careful with scammers. Within every potential scheme for making "easy money", there are dozens of companies looking for preys. You may end buying a property full of defects, or paying much more than you were expecting to. Avoid cheap TV late night ads, the money making plans that come within your spam mail and be very careful with those webpage's that gives a 100% guarantee that they will make you rich. Those aren't serious investment plans, so have your eyes opened.

Which Are Routes For Investing In Foreclosed Homes?

The best risk free deals that you can find in the market are those foreclosed homes that are owned by banks. Banks are, in the majority of cases, serious institutions, who have to comply with federal and state law. They will not risk their reputation in the market with elaborate scamming plans in foreclosed home auctions.

Another advantage of going with a lender such as a bank is that you can finance the property with them. They can provide you with a below the market interest rate or a lower down payment. Plus, since the bank has already done the appraisal of the property, you will not have to pay for it.

If you are willing to risk a bit more, in order to obtain a better deal, you have two options. The first one is to look for a home owner who is on the brink of losing the property. In those cases, you can negotiate with him and see how both of you can benefit from the deal. In your case, you will obtain a property at a reduced vale. In the case of the original owner he will not loose all of the equity he had already invested in the mortgage.

The second one is to go directly to the auctions. This path isn't recommended for first-time foreclosure investors, since it requires experience and lot of knowledge of the real estate market. The two main disadvantages of this path is that you won't be able to see the property, and you will have to pay at that moment.

Investing foreclosed, real estate property is not for everyone. There are some sacrifices that need to be done in order to really accomplish what you are looking for: the house or property of your dreams for half the price. That's why not everyone takes the path of investing in foreclosed homes. But, if you manage to invest the time and buy your dreamed property, you will feel pretty satisfied with yourself.

Foreign Direct Investment - Trends and Advantages

The United Nations Conference on Trade and Development (UNCTAD) reported in the end of October 2010, which Foreign Direct Investment (FDI) had significantly reduced in this year till now, as compared to the statistics for previous years.

The UNCTAD, established in 1964, has as its aim the participation of developing countries in the global economy to improve their economic status. It views foreign direct investment in developing countries as beneficial for the growth of these countries. It also gathers statistics and analyses various facets of the world economy.

According to the UNCTAD, foreign direct investment into developing economies would be totally the same as in 2009, dashing hopes of any increase this year as had been predicted previously.

The UNCTAD director of investment and enterprise division, James Zhan, also mentioned worries about further impact on FDI levels due attempts by countries to devalue their currency. The UNCTAD director expressed fears of a currency war where countries push down the value of their currency to attract more FDI. However, this can also affect a multinational company's profits.

According to statistics from Global Investment Trends Monitor, a global FDI analysis released periodically by the UNCTAD, foreign investments in the second quarter reduced by 25% compared to the previous quarter of 2010. Compared to the data for the same period in the year 2009, the investment levels had come down by 15%.

The Global Investment Trends Monitor noted increased FDI in Russia and China, and a decrease in FDI inflows in other developing countries. The levels of FDI in 2010 will remain much lower than what it was before the global financial crisis.

Why is Foreign Direct Investment (FDI) so important? How does it benefit both investors as well as the countries in which they have invested? Let's take a look at the concept of FDI in a global economy and some of the advantages of foreign direct investment. We will also review the FDI scenario in Chile as an example.

What is Foreign Direct Investment (FDI)?

Instead of investing in local businesses, putting money in a company functioning or incorporated in another country is foreign direct investment. For the country which is attracting the investment, the investor is a considered a "foreign direct investor". The foreign direct investor can have influence in the management of the companies invested in.

The foreign direct investor may have a varying amount of stake in the invested company - stakes can be as low as 10% or may also cross 49% of the shares or stock ownership. Some countries may have caps on the amount of equity a foreign direct investor may hold. For example, the Reserve Bank of India allows foreign equity only up to 50% in investment in specific mining sector in India. It totally forbids FDI in mining of iron and manganese.

The foreign direct investor seeks to have a controlling stake in the entity invested. This distinguishes it from an ordinary foreign investment.

The flow of capital from the foreign investor to the company invested in becomes an FDI inflow. FDI has three parts - equity capital investment, reinvested earnings and intra-company loans.

Advantages of Foreign Direct Investment

In the global economy today, we see many developing countries competing for foreign direct investment. FDI is said to be an important factor for spurring the development of a nation.

Let's take a look at some advantages of foreign direct investment to a host country:
• Integration into global economy - A developing country, which invites FDI, can gain a greater foothold in the world economy by getting access to a wider global market.
• Technology advancement - FDI can introduce world-level technology and technical know-how and processes to developing countries. Foreign expertise can be an important factor in upgrading the existing technical processes in a host country. For example, the civilian nuclear deal between India and the United States would lead to transfer of nuclear energy know-how between the two countries and allow India to upgrade its civilian nuclear facilities.
• Increased competition - As FDI brings in advances in technology and processes, it increases the competition in the domestic economy of the developing country, which has attracted the FDI. Other companies will also have to improve their processes and products in order to stay competitive in the market. Overall, FDI improves the quality of a products and processes in a particular sector.
• Improved human resources - Employees of a host country in which there is an FDI get exposure to globally valued skills. The training and skills upgradation can enhance the value of the human resources of the host country.
The advantages of foreign direct investment to the investor includes access to a larger market in the host country, ability to tap the potential of a cheap and skilled labour, making use of resources in the host country and pursuing growth goals by diversification and optimising costs.

Sample Case - Chile International Foreign Direct Investment 

Chile has been in the news recently for the dramatic rescue of several miners trapped several hundred feet underground in a gold mine. The world praised the efficient manner in which the rescue was conducted. Many commentators also noted how the positive image would help Chile international foreign direct investment inflows.

Chile international foreign direct investment seeks to take advantage of the natural resources in the country. Chile has been an FDI-friendly nation in Latin America.

The Economic Commission for Latin America and the Caribbean (Eclac), an agency of the United Nations, reported that FDI in Chile was the third largest for South America, with an inflow of USD 8.03 billion.

The foreign direct investment in Chile in the year 2009 was USD 6.21 billion. FDI has continued in sectors such as mining. Factors such as the availability of raw materials have attracted FDI in the mining sector in Chile.

Bond Markets - Things to Consider Before You Take the Leap!

Bonds are another flexible category of financial instrument. Bonds are usually floated by companies. They can be purchased by anyone the only condition being an undertaking from the issuing company that they will repay the money borrowed by selling the bonds with interest on a specified date. Bonds may be sold by corporations and government.

What are Bonds and Why Should You Invest in Them?

Bonds are financial instruments that help large business houses and the state to rise finance on a large scale. In return the stakeholder gets interest periodically and the principal amount along with the interest accumulated on a specific date. Bonds were introduced by a king sometime back in the medieval age and now it is being used as an effective source of raising finance by companies and governments.

Your returns are assured in a bond unlike other financial instruments like shares or Offshore mutual funds. There are no risks involved while investing in a bond. They can be a means for regular income. If your investment portfolio is made of shares, bonds and other financial instruments the income from bonds can make good the loss created by others. On the contrary if there are profits from other investments the regular income from bonds will help you to make further investments or save money or for meeting other expenses as you wish.

Types of Bonds

Bonds are generally classified on the basis of the body/institution that issues them. Moreover the category of bonds may vary from country to country and from governments to governments. Another way of classifying them is on the basis of maturity period. Another way of classifying them is on the basis of tax exemptions that they are entitled to.

Some of the different types of bonds are as follows:

Municipal Bonds

Municipal bonds are also known as munis. They denote the bonds issued by municipal corporations in the locality. The holder of this bond is entitled to claim federal tax exemption. They funds raised from these bonds are used to finance local projects. Municipal bonds are not risk free though the fact remains that the risks involved are less.

Corporate Bonds

Corporate bonds are issued by companies. The objective is to enable them to meet the high cost that they have to incur for big projects. However these bonds are very risky no matter whether they are issued by a reputed company or not and hence the interest rates are usually high. There are two more categories for classifying these corporate bonds. In one case the company allows you to convert these bonds into shares whereas in the other the company repays the bond value at a reduced price if there is a fall in the interest rates and if it is before the maturity date.

Government Bonds

Government bonds are issued by the concerned governments. They are absolutely risk free. Another advantage of government bond is that they help you to claim lots of tax exemptions. The money raised from these bonds is used to finance large projects undertaken by the government in various parts of the country for welfare activities to people in the state.

Saving Bond

Savings bonds are also issued by the government. Unlike other bonds the issuer or the purchaser cannot convert them into shares if he is investing in savings bonds. While he is investing in savings bonds there is no possibility of settling the equivalent money value of the bond before the maturity date. The buyer gets lot of tax exemptions by investing in saving bonds. These bonds also offer lot of tax benefits to the buyer. Similarly there is no secondary market for these saving bonds meaning that you cannot sell it to others except the issuer unlike other type of bonds. They are also equally safe like the government bonds.
Factors to Determine before Investing in Bonds?

When you are investing in bonds you must understand the features of the particular bond that you are about to invest and also calculate how the features will be beneficial to you. The interest rate and amount is a crucial factor in this regard. Similarly you must analyze other factors like maturity period purchase price and your financial constraints. Above all you must know how to invest in bonds.

Can you Compare the Bond Market with the Stock Market?

Bond market and stock market are two opposite forces like the two sides of the coin.When the bond market is doing well the stock market will suffer from slump. Similarly when the stock market is doing well the bond market will not do well. There is a simple fact behind this. Both these markets involve extremely different operations. So when there is a fantastic performance in the stock market it shows that the interest of the masses is towards stocks. Hence all the economic activities will be centered to this issue. The vice versa also applies truly.

Benefits of Bond Market

The first and foremost benefit of bond market is that it facilitates regular income at the lowest risk. Apart from gaining tax exemptions bond certificates will speak on your financial strength. This can be particularly advantageous if you want to secure a loan for your business entity or personal purposes. Since they help companies and the state to undertake development project the economic activities of the country increases gradually and the economy can flourish.

Bonds are no doubt a valuable form of investment. However there are certain limitations when compared with a stock market. In a stock market the risks are high and the returns can be high or moderate or low. Since the returns are fixed and regular the earning capacity is reduced. It is not advisable to think of investing in stock bonds or any other categories of bond investments alone. A diversified portfolio with appropriate allocation of mutual funds, bonds and shares will give you great returns.

The Time is Ripe for Investment in Oil and Gas

It is a well-known fact that oil and gas investments have taken an unprecedented role in the world, to the extent that world peace seems to be at stake because of this issue. Humans have depended and continue to depend on these natural resources of fuel. The largest amounts of oil reserves are found in Saudi Arabia, Canada, Iran, Iraq, Kuwait, United Arab Emirates, Venezuela, Russia, Libya, and Nigeria. Countries with the largest source of natural gas are Russia, Iran, Qatar, Saudi Arabia, United Arab Emirates, United States, Algeria, Nigeria, Venezuela, and Iraq.

As more oil and natural gas deposits are discovered around the world, reserves will grow. New reserves have been located in Brazil, the Gulf of Mexico, Alaska, off the western coast of Africa, Russia, and many areas of Asia and the Pacific. And of course, how many more reserves the Middle East possesses remain a speculation and a matter of political strife.

Advancing technology has helped in developing the oil and gas industry and investments have been a major source of financing this growth. Thus oil and gas investing is a very viable option that can be considered by investors.

Different Ways to Invest in Oil and Gas

The sharp increase in oil and gas prices in 2004 and 2005 resulted in a flow of cash with the growth in the level of investments. If you are interested in investing in oil and gas, you need to look into the different ways you can invest.
• Major Oil Company Stock - Investing in the stock of major oil companies is a safe option, although the returns may not be high.
• Medium-Sized Oil and Gas Companies - Since most of these companies are still growing and developing their stocks carry more risk although there is a higher rate of return. These stocks are traded on exchanges throughout the world.
• Independent Oil and Gas Companies - Many of these companies get the investor involved in industry development projects and exploration too. These direct investment options are known as private placement and carry tax benefits and higher returns although there is an increased element of risk.
• Mutual Funds - These involve a variety of options - stock in major oil companies; stock in independent companies; exploration projects etc.
• Drilling Funds - Many small independent companies provide funds for drilling projects - exploration drilling and developmental drilling. This is yet another option for investment.
• Commodities Trading - In this type of investment, you are speculating in price movement - whether or not the price for oil or gas will move up or down. This investment carries a huge element of risk.
• Royalty Funds - This investment lasts for many years and carries a low risk factor along with low returns. The revenue results from royalty interests from different producing fields.
Safe Investments

Investing in oil and gas industries, especially when major companies are involved is the safest option, with the lowest element of risk. Of course, this is offset by the low returns. But if safety is the main objective in investing in oil and gas, then this is the best choice.

Three factors make investing in the oil and gas industry safe.
• Investment acumen - To be a safe investor, you need to ask the right questions and understand the right answer. This acumen or insight will help you to make safe investment decisions.
• Investment objectives - You need to be very clear about your investment objectives. Is it high returns or low risks? Depending on what your objectives are, you need to choose the appropriate investment option.
• Investment vehicles - Again, your investment objective will guide you to choose the most suitable investment vehicle - stocks, investment funds, drilling funds, private placements, commodities trading, or some combination of all of the above.

Advantages of Investing in Oil

Investing in oil and gas industry can be very advantageous. After analyzing the different options, their structures, and the level of risk involved, you can make a choice of a certain type of investment that can prove to be advantageous to your investment objective.

The benefits are several:
• Tax Benefits - According to Newsweek drilling is the very best tax-advantaged investment. 65% to 80% can be written off in the first year of certain investments and for certain others, it is 100% tax deductible. The investor's share of expenses in intangible drilling costs, intangible completion costs, tangible completion expenses, and depreciation costs, along with depletion allowance, and alternative minimum tax make these investments tax-advantageous to the investor.
• High Financial Rewards - Certain investment options afford a return of capital within a year; returns that are better than 10 to 1; more than 50% annual rate of return.
• Low Risk Potential - With advanced technology, the risk factor has been minimized. Several projects have a 90% chance of success rate.
• Availability of Drilling Prospects and Low Drilling Costs- There is a wider choice of small drilling prospects available now than in the past. Moreover drilling costs are at an all-time low with a decreasing rig activity.
• Higher Demand and Consumption - The demand and consumption of petroleum are doubling every ten years. So, at the present stage where there is no viable alternative fuel resources, investing in oil and natural gas are really advantageous.
• Lacks of Conservative Sources of Finance - Since the traditional sources of money are no longer available, the capital of individual investors are in demand, and so they stand to gain from these investments.
• Government Support - Governments recognize the value of oil and gas investments for the economy of their countries. So they encourage domestic drilling with special tax concessions. Investors in oil and gas have a distinct advantage in this.