Diversify or perish. I think that’s an H.G. Wells quote.
OK, OK, I know it’s actually “adapt or perish.” But if H.G. Wells managed investments rather than words, I bet he would have tweaked that quote to my version.
In fact, you’ve probably heard that golden nugget of investment wisdom before. It’s something every investor should be well-acquainted with because it’s the key to successful investing.
Plain and simple: Never put all of your investment eggs in one basket. If the market falls out from under that basket, your nest egg is going to crack and spill your savings all over the floor.
It’s an easy bit of advice, I know. You can say that diversifying is the smart route, but what exactly should you diversify with?
For that question, I have one answer today: metal mining companies.
Every investor should have a bit of exposure to miners – especially small-cap miners, if you like capturing the quick pops that most of Wall Street tends to miss out on.
It simply gives you access to above-average share price volatility. Particularly today.
Now, many of you might be saying: “But isn’t that a little risky?”
It can be, absolutely. Any sector that sees consistent volatility (like crypto assets) can be a bit risky – but much of that risk is managed by having a plan in place. That protects you from making knee-jerk moves or holding onto investments longer than you should.
You just need the right strategy. And if you don’t have one in place, I’d say you should start looking for one now, because the spotlight is starting to shine on the mining industry as the commodity market recovers.
According to a report by PwC released last year, the mining industry saw a turning point in 2016. The top 40 mining companies aggregated a net profit of $20 billion – which handily tops the $28 billion loss of 2015. Meanwhile, their valuation climbed into 2017.
In fact, the market capitalization of those 40 companies rose 45% in 2016 to $714 billion.
And the good news is continuing for miners.
Take gold for instance. Miners are particularly sensitive to rising gold prices right now. As gold continues to climb (and it will), gold mining stocks will soar.
It’s time to go long in this area.
In fact, since early December, the VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) has been climbing away from its support line around $30. It’s now up about 14.8%, a nice rally that could prosper further if it breaks through current levels.
All of this is to say that if you’re looking to diversify more, miners are a great bet.