Know When To Let Go

The mining industry’s booming past has given rise to price and home bias. This means investors continue to hold single-commodity shares, when really, they shouldn’t.

- Simon Brown

One of the worrying features of many local portfolios I see is that they hold gold and platinum mining stocks. This trend is often more pronounced in newer and smaller portfolios.

But truthfully, I see these beaten down mining stocks in far too many portfolios, and in every case the stocks are loss making. Sometimes that loss is modest, but it can be massive due to a concentration of these single-commodity mining stocks.

There are a few reasons for these holdings, with the biggest being home bias and price bias.

Home bias, in this case, is that because our local economy was largely built on the back of mining and miners, many still feel an attraction to the dizzy heights the shares once reached. This is despite the fact that the industry has long had its day. Local mining has been in decline for decades and as a percentage of our economy it has been falling for even longer.