Issue link: http://resourceworld.uberflip.com/i/423464
26 www.resourceworld.com D E C E M B E R / J A N U A R Y 2 0 1 5 INVESTMENT N atural resources are materials that occur in nature that can be used for economic gain: minerals, lumber, water, land, oil and gas. Investments in anything, including natu- ral resources, should be tailored to each individual's specific goals. The reasons for investing would shape one's investment profile and could vary from investing for retirement to achieving short-term or long-term financial goals. There is no well established formula that would help us cre- ate a portfolio because we are all different and we have different knowledge, capital, risk profile, expectations and time frames for investment ideas and vehicles. Basically, one's investor profile must be matched by the types and the amount of risk incorporated in one's investments. The older we get the more risk adverse we become and are probably more interested in steady dividends vs. capital gains. Therefore, investments in large and well established producing companies from different sectors would be sought versus speculative invest- ments in volatile companies. There are many sectors in which one should invest in order to have a balanced portfolio. Due to the increase in the world's popu- lation and growing demand for commodities, we should consider investing in resource companies and commodities as, at any given time, at least some of them would be in high demand – thereby providing potentially profitable investment opportunities. Of course, since the commodities business is cyclical, it is best to invest in a bull market when a rising tide lifts all boats. However, at or close to the bottom of the commodities cycle can present good investment opportunities for companies able to weather the downturn and those that own sound projects pre- senting an upside potential. The case for natural resource investing is compelling, so per- haps about 25% of a portfolio could be invested in this sector. If the investor is well acquainted with this type of business and/ or during a commodities bull market it could go up to 50%. Investments in blue chip producers (established mining or energy companies included) should be made on a long term basis while investments in high risk-high reward junior miners or start-ups should be made with a shorter time frame in mind. Depending on one's risk profile, producing mining or energy companies could make up to 75% of a natural resources portfolio. As many natural resource projects are located in foreign coun- tries, an investment could be made in index funds that track high growth developing economies. But consider that their geopolitical risk profile could be an important deterrent for investing. BRIC lost much of its importance as an investment destination as Brazil, Russia and China experienced economic and political problems; maybe it is up to India to make up for loss of investor confidence. Do we need a broker to tell us what to do with our money? If you are a well informed investor – one who understands the busi- ness and its players – the answer is no. But if we want to invest in industries that we do not fully understand, or plan to invest a large amount of money, then risks can be minimized by consider- ing the advice of a broker backed by a research department or subscribing to valuable industry analysts' newsletters. There are fees or costs associated with enrolling with one of these specialists so we would have to take that into consideration as well. No investor can perfectly time the buying or disposing of assets; however, one does not need to babysit one's stocks a few Building a natural resource investment portfolio by Dan Oancea