Sometimes our personal investment prejudices mean we make mistakes. I’m annoyed that I’ve allowed a couple of mine get in the way of a major money-making opportunity this year.
The mining sector is up over 100 per cent year to date and oil is up by around 40 per cent. Yet I’ve missed out on much of this major recovery in natural resources.
The first reason is that I’m often slow to switch on to a new trend. So when these sectors made a decisive bottom earlier this year I was too busy congratulating myself on having been consistently bearish for several years.
Yet in a strange way this is a ‘good fault’. Getting the timing right in recovery situations is very difficult and you can lose a lot of money by jumping the gun and buying in too early.
I’ve always accepted I will tend to miss the big rewards available to investors at a major turning point because I prefer to jump on the new uptrend once it’s clearly established.
However my second prejudice is just that – a prejudice. I simply have little empathy with these sectors. They are capital intensive and heavily dependent on commodity prices.
This makes them hard to value; as well as producing unnerving boom and bust cycles. Some investors might love them, but I’m afraid I don’t! Which always makes me a rather reluctant resources investor.