Stocks in Gold and Copper Mines... and Chinas influence!!?

Hi All,

I'm a beginner in the stock market and i have about 10k that i want to invest... but understandably I鈥檓 a little anxious on what stocks to be buying.

I'm looking at Gold and Copper mines due to the strengths of both of them despite the lows in the Australian stock market and in face of a possible recession in the States... but I鈥檓 not sure of the effects of Chinas influence on the price of gold and copper.

Could anyone shed light on this topic... or give advice to a beginner that is trying to learn as much as possible.

Thank in advance

In my view, China is becoming an increasingly larger consumer of all kinds of things, including gold and copper. I would expect that extra demand to keep the prices higher than they would be without that demand (unless of course the supply increases by more than the demand, which I doubt will happen).

However, I personally would NOT be investing in anything related to gold, copper, or other commodities right now. The prices have risen dramatically in recent months. While they could still go higher, I suspect we're closer to a top than a bottom in commodity prices. Remember the bubble in tech stocks a few years back? Prices were high and rising and everyone wanted in. Then the bottom fell out and the people that bought high lost a lot of money. Remember the bubble in home prices just a couple years ago? Same story.

The last time gold was setting record highs was in the early 1980s. Same story as the other bubbles. Not long after, gold started a long downtrend and only got back to the early '80s prices recently - after 27 years! Historically, over the long-term, gold and gold mining stocks have not been particularly good performers.

If I was just starting and had $10k, I personally would put it into a mutual fund that tracks a major market index like the S&P 500, Mid-Cap 400, or Russell 2000. (Fidelity, Vanguard, American Century are some of the fund companies I like.) Diversifying (i.e. spreading) an investment across many stocks in many industries is important to protect the investment against a sudden drop in one or two stocks. Buying an index-based mutual fund provides diversification with a single purchase. Doing it by buying 20 different stocks, in my view, requires much more than $10k (I'd say $50k minimum) to keep the commissions low as a percentage of the investment.

Another possibility is an exchange-traded fund (ETF) that tracks a major index. SPY, MDY, and IWM are the ticker symbols of three such ETFs. An ETF is pretty much like a mutual fund, but is bought and sold like a stock through a broker rather than through a mutual fund company.

For me personally, I like the Russell 2000 based funds (or the IWM ETF) right now. In the recent stock market debacle, small-company stocks are down more than larger company stocks (over 20% off the high now I think). They could certainly still go lower, but looking back five years from now, I think the current prices will look VERY cheap.