The risks and rewards of natural resources stocks
05 October 2013
The sentiment that drove prospectors west in the hope they’d strike it big is just as prevalent today as it was a century ago. Steve McDowell explores the lure of the stocks that promise the mother lode – but rarely deliver the goods.
Private investors love them – can’t get enough of them. Gold mines, silver mines, rare earth metals, ore, base metals, minerals, oil and gas – they change hands like hot spuds and a great many of them lose a lot of their money.
The reason for this is very simple indeed and comes down to an emotion as old as mankind itself: greed.
The much misquoted Mark Twain (himself a former prospector) in 1894 famously defined a mine as a hole in the ground owned by a liar.
We invest ultimately to make money, right? And all investments carry some level of risk, even cash, so why not take more risk in exchange for the chance of some very big rewards?
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