Jam Tomorrow...gold, oil, gas

Freetrade Chat 🔥
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When I first decided to get into investing a few months back, the idea of a small company that mined for natural resources seemed very appealing.

It felt like the road to a multi-bagger. One big find and that 20p SP would no doubt hit big heights.

But the more I read and learned, the more I realised that the chances of profits with these stocks are very poor at best.

Judging by the forum, these ‘lottery’ stocks still seem to hold appeal to many.

So, much as my mind is made up to avoid, do you have any success stories with these types of stocks?

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I steer clear of the small-cap miners – too much risk for my tastes – but I’d consider the likes of Rio, Shell etc as part of a high-yield portfolio. However, nowadays I tend to avoid individual stocks altogether.

I have exposure to the sector through BRWM, a broad mining trust. I like to have a few defensive holdings that aren’t going to move in lockstep with the rest of my portfolio. For this reason, I’m looking to add the likes of EGL and BHMG in the years ahead if I can get them at decent prices/discounts.

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Yeah I agree its not an industry problem, its a small cap lottery problem.

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Yeah, it worries me that many people may not know just how much risk they’re taking on by investing in these tiny mining firms.

I think a lot of newbies incorrectly think a stock is ‘cheap’ if you can buy it for 2p a unit.

It’s easy to fantasise about how much your 100,000 shares could be worth but investing’s rarely so easy.

Some people will make a killing with penny stocks, however they will be a tiny minority.

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Yeah that was my main point. As a newbie it seemed so attractive and the more I learned the less I was fooled.

Probably lots of people’s first experience and puts them off for life.

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I could hardly agree more. As great as low-cost brokers like FT are in terms of providing equal access to investing, they also make it incredibly easy for people to do stupid things with their life savings.

It troubles me that that democratisation vastly increases the chances of horror stories like this:

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Horror story.

Generally too, the way people can milk a buisness and let it fail with little or no consequence is also a massive concern with small caps.

There are definitely many easy pitfalls to fall into as a new or naive investor and your only defence is education and awareness.