I’m a relatively new investor. I currently only hold one security in that
sector, and that’s Suncor. I chose it because of the high volatility of the
sector and the strong market capitalization of the company.
However, this sector includes more than just oil. I have chosen no
companies in the precious metal sector or any other commodity. This is
simply because I don’t know how to select them, and I worry about their
My question is this: Should I invest in an ETF or a small basket of ETFs
that helps allocate my funds appropriately within the sector, or should I
choose individual companies? If I am choosing individual companies, which
groups within the sector do I choose? One oil and gas, one gold, one
copper, one lithium, for example? I wouldn’t know where to begin.
If the former is the way to go for me, do you recommend any ETFs or mutual
funds that satisfy my goals? – Lance R.
– We have several stocks on my newsletters’ recommended lists that would
provide exposure to a range of resource sectors. For precious metals, I
Franco-Nevada Corp. (TSX: FNV), which has performed very well. For copper, look at
Lundin Mining Corp. (TSX: LUN).
Teck Resources Corp. (TSX: TECK.B) is Canada’s largest diversified resource company, with mining operations
focused on copper, steelmaking coal, and zinc. As well, it has energy
interests in the Foot Hills Oil Sands project, which is scheduled to come
into production next year.
If you prefer an ETF, the
iShares S&P/TSX Capped Materials Index ETF (TSX: XMA) provides exposure to all types of resource stocks except oil. Top holdings
Barrick Gold Corp. (TSX: ABX)
Potash Corp. of Saskatchewan Inc. (TSX: POT),
Agrium Inc. (TSX: AGU), and Franco-Nevada. However, over half the portfolio is in the gold
sector, and returns have not been great, with an average annual compounded
rate of return of only 1.4% over the three years to May 31.
There are many natural resource mutual funds that include energy stocks in
their portfolios along with mining and other resource companies. However,
most have unimpressive track records – some have posted average annual
compounded losses of more than 20% over the past three years.
However, one that’s worth a look is the FundGrade A-Grade-rated
Scotia Resource Fund, which has a 3-year average annual compounded rate of return of 2.6% as of
May 31, and a one-year gain of 7.8%. It is a no-load fund that invests
internationally. Some of the top positions are in
NexGen Energy Ltd. (TSX: NXE), Lundin Mining,
Agnico-Eagle Mines Ltd. (TSX: AEM), and
TransCanada Corp. (TSX: TRP).
My own preference would be to focus on the individual stocks I have
mentioned. – Gordon Pape
If you have a money related question send it to me at firstname.lastname@example.org. Write “Fund Library Question” in the subject
line. I can’t guarantee a personal response, but I’ll include the most
interesting ones in this column.
Gordon Pape is one of Canada’s best-known personal finance commentators and
investment experts. He is the publisher of
The Internet Wealth Builder and The Income Investornewsletter, which are available through the Building Wealth website.
For more information on subscriptions to Gordon Pape’s newsletters,
check the Building Wealth website.
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Notes and Disclaimer
© 2017 by The Fund Library. All rights reserved.
The foregoing is for general information purposes only and is the opinion
of the writer. Securities mentioned carry risk of loss, and no guarantee of
performance is made or implied. This information is not intended to provide
specific personalized advice including, without limitation, investment,
financial, legal, accounting, or tax advice. Always seek advice from your
own financial advisor before making investment decisions.
BUILDING WEALTH WITH GORDON PAPE