How to cut your resource risk

Article Excerpt

Resource stocks should move higher as the global economy continues to recover in the years ahead. But there will be inevitable declines along the way. So we think you should cut your risk in this volatile sector by investing mainly in stocks of profitable, well-established resource companies with high-quality reserves. Teck Resources is a good example. The company bought Fording Canadian Coal Trust in 2008, just before the recession and credit crisis. That forced it to sell shares and assets to raise cash for debt repayments. However, Fording’s coal mines in B.C. should last 20 years or more. And the company’s copper, zinc and other mines make it less reliant on a single commodity. Resource stocks like Teck also provide a hedge against inflation. That’s because they profit directly from rising commodity prices. However, resources is one of the most volatile economic sectors. That’s why conservative investors should limit their resource holdings to no more than 20% of their overall portfolios. portfolios…

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