In resources, time to stick with quality

Article Excerpt

Today many investors take it for granted that rapid industrialization in China and India has spurred the sharp increases in energy and metal prices of the past few years. They overlook the fact that hedge funds have poured investor money into the commodity markets these past few years — directly, and by investing in junior resource companies. As hedge funds and other traders try to sell their holdings, commodities could become even more volatile than usual. Prices could slump deeply over the next six months to a year. But rapid growth in China, India and elsewhere ensures that commodity prices will fluctuate in a much higher range in the next 10 years than in the last 10. That’s why we recommend that you hold some Resources issues in your portfolio. But it pays to stick with well-established companies, and limit your exposure to 25% or less of your overall portfolio. That way, you avoid the heavier risk of more aggressive stocks, but…

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