Don't rule out resources from your portfolio


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Do you think you could invest successfully without ever buying a resources stock? I reckon you could. Just as you could live happily without ever visiting a beach. But you'd be missing something by never squishing sand between your toes and I think you'd be missing something by totally ignoring resources.

Many investors rule out buying resources stocks altogether. They may feel they don't understand them well enough or know that, over the long run, the resources industry has been a poor one when it comes to the returns delivered on the money invested in it.

Some investors "swear off" a sector after a nasty bear market only to get sucked back in after things turn around. If you're one of those who's sworn off resources stocks, that's fine. Make sure you stick to it forever. But if you'd ever contemplate buying such stocks, don't wait until they're fashionable again.

resources stock

This investment theme is very much a long-term one. The nature of these things is cyclical and I'd expect another upturn at some point in the next decade, so I think now is the time to consider adding them to your portfolio. I believe that if you buy good stocks when the vast majority of people are down on them, you'll do well overall.

To read more about Greg Hoffman's tips on resources stock, grab a copy of the February 2016 issue of Money.

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Greg Hoffman is a non-executive chairman of Forager Funds Management and is an independent financial educator, commentator and investor.