Global Mining Investing $69.95, 2 Volume e-Book Set.
Author, Andrew Sheldon

Global Mining Investing is a reference eBook to teach investors how to think and act as investors with a underlying theme of managing risk. The book touches on a huge amount of content which heavily relies on knowledge that can only be obtained through experience...The text was engaging, as I knew the valuable outcome was to be a better thinker and investor.

While some books (such as Coulson’s An Insider’s Guide to the Mining Sector) focus on one particular commodity this book (Global Mining Investing) attempts (and does well) to cover all types of mining and commodities.

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Monday, February 4, 2008

Misconceptions - Risk vs Return

One of the misconceptions I learned in university economics courses was that there was an inverse relationship between risk and return. The assertion was made on the premise that people would demand a higher level of return to offset a higher 'perceived' risk. There is some merit in this statement, but another factor strikes me as pertinent - the quality of the perceptions assessing market value. Consider that there are mining analysts, but they only get paid to research major stocks, so they can therefore only recommend researched stocks. There is thus an information gap. The implication is that not every market participant has a good understanding of all stocks, and some small stocks might be totally off the radar of brokers. Thus not all participants perception of the market is equal. One persons 'perception of risk' is not the same as another person's because their knowledge and experience is different. There is always a story that is poorly understood, or is just outright ignored because the market was not open to the story. This has a lot to do with personal focus, though I would discourage you from having such a fixed loyalty to one sector.
A mining analyst confronts a much smaller risk than a novice investor. A disciplined analyst has a far better understanding than an analyst whom cuts corners. An investor who has a critical mind has a better likelihood of success (or less risk) than an investor who just accepts what they have read. An investor who listens to others opinions before acting on his own, an investor who researches his stocks, and similar companies has a better risk-reward profile than an investor who doesn't. An investor who is emotion or risk-averse is likely to act on distorted thinking, and will perform worse than a trader who systematises their trades, thus acting in a mechanistic fashion.
The implication is that there is a great deal that you could be doing to reduxe your risk exposure in the market apart from listening to others when they say its too risky. In fact some of the best trades are when people are telling you to stay out of the market.
Andrew Sheldon

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