Diversify or perish. I think this is a quote from H.G. Wells.
OK, OK, I know it's actually 'adapt or perish'. But if H.G. Wells was dealing with investments rather than words, I bet he would have adapted this quote to my version.
In fact, you've probably heard this golden nugget of investing wisdom before. This is something that every investor should be well aware of, as it is the key to a successful investment.
Plain and Simple: Never put all your investment eggs in one basket. If the market falls below this basket, your nest egg will crack and spill your savings everywhere.
It's easy advice, I know. You can say that diversification is the smart way, but what exactly should you diversify with?
For that question, I have an answer today: metal mining companies.
Every investor should have a bit of miner exposure – especially small cap miners, if you like to capture the quick pops that most Wall Street tend to miss.
It simply gives you access to above-average stock price volatility. Especially today.
Now a lot of you might be saying, "But isn't that a little bit risky?"
It can be, absolutely. Any industry that experiences constant volatility (like crypto assets) can be a bit risky – but a lot of that risk is managed by having a plan in place. This saves you from making instinctive moves or holding investments longer than you should.
You just need the right strategy. And if you don't have one in place, I would say you should start looking for one now, as the spotlight is starting to shine on the mining industry as the commodities market recovers.
According to a PwC report released last year, the mining industry saw a turning point in 2016. The top 40 mining companies totaled a net profit of $ 20 billion, which far exceeds the loss of 28. billion dollars of 2015. During that time, their valuation soared until 2017..
In fact, the market capitalization of these 40 companies increased 45% in 2016 to reach $ 714 billion.
And the good news continues for minors.
Take gold for example. Miners are particularly sensitive to rising gold prices right now. As gold continues to rise (and it will), gold mining stocks will soar.
It is time to go long in this area.
In fact, since early December, the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) has been moving away from its support line by around $ 30. It is now up around 14.8%, a nice rally that could still thrive if it breaks past current levels.
All of this to say that if you are looking to diversify more, miners are a great bet.