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of goods and services; they have also
provided exposure to economic growth,
because as economies expand they
consume more raw materials and energy.
There are a number of ways to invest in
these sectors, including stocks. The major
miners such as BHP Billiton and Rio Tinto
dominate and make up more than half of
the S&P/ASX Resources Index. There is
a raft of speculative smaller mining and
resources companies, including 137 oil
and gas stocks now listed on the ASX.
But investors don’t have to pick
stocks; they can diversify through listed
investment companies (LICs) that have
stakes in a range of resource companies.
Exchange traded funds (ETFs), which
track an index’s price and performance,
have also gained in popularity.
Retirees can also invest in specific
commodities, such as gold and silver,
using a range of investment tools that
track prices, including commodity-
specific ETFs. Derivatives such as
warrants, CFDs and futures also track
commodity prices, but most experts warn
retirees off using those potentially risky
Despite all these options, Lennox says
retirees should be wary of taking a broad
punt on the energy and resources sectors.
The major downside is volatility. “The
capital price can move significantly and
usually in the short term, which is what
retirees have to consider,” Lennox says.
But should you?
This year has been hard on the resources
and energy sectors, and the stocks that
operate in them. Big miners such as Rio
Stay up to date with the latest expert
financial advice for retirees on the Probus
South Pacific website.
With Federal Government
initiatives to cut carbon
emission and a general
greening of companies and
economies, the renewable
energy sector has enormous
potential. But it has yet to
deliver for investors.
The main way to get
access to the renewables
sector is through
‘cleantech’ stocks, which
include renewable energy,
water use technology and
According to Australian
CleanTech, there are 84 listed
companies in the space with
a total market capitalisation
of almost $10 billion. But
most have struggled.
company Geodynamics, for
example, hit a high of $1.77
in 2008 but has slumped
to just 12.5 cents. The
ACT CleanTech Index has
almost halved over the past
three years. “Renewable
stocks have not made
money for investors so far,”
says Peter Strachan, editor
As retirees age they
have less time to ride
out boom and bust cycles
so most can withstand
Tinto and BHP have
fallen 22 and 15 per cent
respectively this year.
“The market has been very, very
harsh on resource companies,”
Lennox says. “The price of the
commodity that most of them are
digging up and selling has fallen
sharply in 2013.”
Gold is another classic example of
resources volatility; after surging to
records as investors sought a safe
haven, the gold price has dropped
25 per cent in the past year.
While the outlook for energy
demand is still solid, energy stocks
remain particularly risky for retirees
because they have a structural
disadvantage – they are price takers.
“They have to take the price given
to them by the market,” Lennox
explains. “All any resource company
can do is ensure cost of production
is as low as it can possibly be.”
By contrast, the major Australian
banks, a favoured investment for
retirees, have pricing power that
allows them to maintain strong
profits and dividends even in
difficult economic times.
Still, energy and resources might
pay off for those willing to work
hard and carefully pick stocks.
“You can find good resource
companies if you’re willing to sit
down and work your way through
individual companies,” Lennox says.
“But it’s very difficult to buy the
sector and say, it’s going up or down.
You have to look at individual companies,
and that includes BHP and Rio.”
Strachan says retirees, if they do choose
to invest in resources and energy, should
stick to larger stocks like BHP, Woodside
and Santos. “Leave the speculative stocks
to others”. ••
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