How to Buy Rio Tinto Shares
Rio Tinto PLC is a London-based mining company that engages in the mining and processing of mineral resources. With a market capitalization of over $100 billion, it is a large cap miner who's business is truly global in scope. It's not dependent on the supply or demand of any specific mineral due to the diversification of its production, which include aluminum, copper, diamonds, coal, uranium, gold, nickel, zinc, lead, silver and molybdenum, to name a few. Shares of Rio Tinto trade on most major stock exchanges around the world.
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Instructions
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Buying Stock
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Allocate funds. Before purchasing a single share, decide how much money to allocate to a position in Rio Tinto. This single stock could represent a portfolio's total exposure to mining, or it could be part of a basket of stocks in the sector. Knowing how much is available to invest will help planning individual purchases.
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Name your price. While it's certainly possible to simply place a market order on any given day and take the price that's assigned, most investors will want to monitor a stock and track its performance before placing a bid. A chart of the recent price action over the past few days or weeks can give an indication of where price can realistically expected to be in the short term.
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Buy a third. For the first purchase, spend no more than one third of the total allocation to the stock. For trades on the NYSE, orders should be placed for ticker symbol RTP.
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Lower cost basis. The reasoning behind buying in increments is that most investors are not able to accurately time stock markets. However, by reserving capital to buy as the price declines, investors can take advantage of weaker prices without exceeding their desired exposure to the stock.
Buying With Options
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Buy calls. Stock can be acquired through the purchase of call options. The strike price is the amount per share that will be paid upon assignment of the option. The total price paid will include the cost of the calls. This is a way to control shares of a company for a lower initial outlay.
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Sell puts. Stock can also be acquired through the sale of put options, which is an obligation for the seller to purchase the stock at the strike price at the time of expiry. The sale nets the seller an initial credit. This is a strategy for buying stock when it appears likely the price will decrease.
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Protect a core position. Options can also be used once the stock is owned to protect gains or mitigate losses. A stock that has appreciated rapidly may be due for a correction--selling covered calls against a position will provide additional income while insuring against a decline in share price. Buying puts will protect against declines, but does not provide the initial income.
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Tips & Warnings
At the very least, read the company's quarterly and annual reports. Know where its mines and other facilities are located and what the potential risk factors may be.
Don't use Rio Tinto as a proxy for a specific commodity. Its diversity gives it a trading profile all its own. Take advantage of cheap share prices whenever possible.
Investing in miners carries additional risks beyond investing in the underlying commodities they produce. Miners, particularly ones with global reach, are subject production shortfalls, fluctuating energy and labor prices, labor and governmental disputes, and environmental and other lawsuits. These risks can effect stock price suddenly and without warning.
Though Rio is not levered to any single commodity, it tends to trade in tandem with global growth trends. A period of slowing global growth will weaken the stock price, just as an explosion of global growth will tend to accelerate price gains.
