Meet 125 Mgmt Teams
Long Story Short: Investing in Natural Resources Can Provide Long-Term Value
Can Investing in Natural Resources Provide Future Value?
Investing in natural resources can provide value as demand for resources such as lumber, precious metals, coal, and water will always exist. Natural resources are core to production, comprising many processed goods. Natural resource companies that either process or supply these resources will be in constant demand as the world population grows and expands. Investing in natural resources requires an understanding of a broad range of processes and extraction companies. Natural resources can be collected in a variety of forms and further processed, packaged, and sold by companies.
Demand. The demand for natural resources such as precious metals and other building materials will increase as the income of a developing country increases. Rising demand for these resources will increase the prices and valuation. Developing countries require large sums of materials such as gravel, steel, and lumber, which can be used to develop infrastructure and public buildings. The demand for infrastructure grows as population growth constantly increases requiring more materials. Companies providing natural resources will see increases in valuation as more demand is needed to be fulfilled, and infrastructure necessitates regular updating and repair, requiring ample spending on natural resources.
Government Purchasing. Many governments will purchase large quantities of natural resources to maintain their supplies of raw materials and meet the need for constant population growth and expansion. Governments help drive demand for natural resources, and companies can fill large orders for these entities. Certain natural resources, such as precious metals, have an inherent store of value and will provide value even during periods of economic inflation.
Investment Choice. Futures allow investors to use a contractual approach, leveraging dollars on shorter periods to trade resources. Natural resource exchange-traded funds allow investors a broad range of exposure to the industry, with a variety of choices for processing and extraction. Investors can also purchase the stocks of many natural resource companies to further diversify their portfolios. Depending on investment choice and price volatility, certain companies can pay out higher or lower dividends.
Understanding. Natural resources cover a broad range, which can be disconcerting for investors who do not have a firm grasp of the industry. A wide variety of options exist for investments, and many provide long-term benefit, but investors may be unaware of the potential value of natural resources and avoid the industry.
Volatility. Natural resources can be volatile, with rapid shifts in the prices of commodities that could dissuade potential investors from the industry. Many investors will choose to avoid the natural resource sector due to its inherent uninteresting nature and volatility, rather focusing on new big tech companies.
Regulation. Government regulation can also inhibit the extraction of natural resources, limiting investor potential. Western investors are largely removed from the natural resource industry as much of the sector is foreign companies. As the limited natural resources are consumed, fewer companies are directly involved in the extraction process.
As the world population expands, the demand for natural resources grows as well. Investing in natural resources is consistently increasing since locating reputable companies that process and extract resources has become easier. A variety of natural resources are available to invest in and an investor has greater choice in purchasing stocks, ETFs, or futures. Limitations on investments in natural resources vary depending the process or ease access within the industry. The natural resource industry has a broad range of investment and constant demand, which can provide value for investors.
https://www.investopedia.com/articles/basics/12/natural-resource-investing.asp, ANDREW BEATTIE, May 1, 2018
https://seekingalpha.com/article/4045818-every-investor-natural-resource-equities, Matt Geiger, Feb 14, 2017