Well, if you’ve read any of my previous posts or follow me in any of my socials, you may already have assumed what I am about to say. But bear with me… I have my reasons!
Yes, I do believe you need natural resources. Shocker! Where do I start? There are certainly many reasons but I will give you my top five:
- Diversification potential: The mining sector has cycles that are normally not highly correlated with other sectors. So when financials/consumer discretionary/etc is going bananas there’s a good chance miners are having a good ride or at least a bit more stable.
- Upside: How likely are you to get the chance to invest in the next Facebook or Google before they make it big? Not very. But you can invest in early-stage mining companies that could bring a small investment into a nice college fund for your kids or a new car.
- Technology is mineral intensive: All the gadgets and devices we use today are only a glimpse of what we will have in 10, 20 or 100 years. Maybe in 100 years, we will have options but in our lifetime (sorry, if you are reading this -or writing for that matter- you won’t be around to see it!), our tech uses lithium, copper, gold, silver, cobalt, nickel, just to name a few minerals that are present in electronics, cables, batteries, etc. We need them and investing in them makes sense.
- Gold is still a decent hedge: When chaos is among us, more often than not, gold will remain strong, as many investors do what’s called “flight to safety” thus pouring funds into it.
- Income: Investing in producing companies can give you both passive income for your portfolio (and there are many companies with a very healthy dividend yield), along with some upside for the future. Normally producing companies are not expected to grow in such dramatic ways as an explorer that goes into production, however, there is always the chance they find a satellite deposit or they spin out a non-core asset for some capital gains or an acquisition consideration that will flow through to the shareholders.
You will say, “OK, I buy it. It makes good sense. But how do I go about investing in this sector? It seems so complicated”. True, it can seem to be one of the hardest sectors to get into but the good news is if you dedicate a little bit of time to learn you can get started and learn as you go. There are many free and premium resources around that can help: the first place you want to go is your country’s stock exchange; I will be writing another post about some of these resources in the new year.