Ben C. commented on the InvestRight.org visitor survey  saying he was looking for  information on mining stocks, in particular about reading technical reports and summaries of mineral reserves and resources.

Early stage mining exploration companies—like many other early stage companies in other sectors—are risky investments. It can take five to 10 years and cost many millions to find out if a promising claim has mineral reserves. It can take many more years and tens, or hundreds, of millions to obtain permits and build a mine before the company starts generating positive cash flow. While the potential for substantial gain from mining investments exists, it comes with the high risk of failure. When mineral projects fail or are abandoned, investors may be left with securities that have little or no value.

It’s important to face the risk-reward factor squarely if you’re interested in mining stocks. And Ben is wise to seek help understanding the technical reports that Canadian regulators require from mining companies at key milestones. These reports are filed on SEDAR  for public viewing at no cost, but there’s no denying they can be dense, highly complex, and may not be written with the average investor in mind.

At InvestRight, we caution investors to put money only into investments they can understand. If you're prepared to spend some time learning about mining with an eye to investment, dig into the following resources:

• The InvestRight primer for investing in mining sets out 10 questions to ask about a mining or mineral exploration company before you invest. 
  
• The Association for Mineral Exploration in British Columbia  (AME/BC) offers many resources including useful links , publications , and courses . A publication called Mineral Explanation Explained, “a general outline and user friendly translation of the technical materials found in news releases and analysts reports” is listed as “coming soon.” Life Cycle of a Mine , a one-page flyer from AME/BC, puts the long time-frame for mining investments into perspective.
  
• The Northern Miner , a mining trade news source, sells the book Mining Explained , which is listed as a “popular layman’s guide to mining.”
  
• Exploration & Mining 101 , is a two-day course overview of mineral exploration and mining for non-technical types, scheduled as part of  the 2010 Mineral Exploration Roundup  to be held in Vancouver, BC January 18- 21, 2010.
  
• BC Institute of Technology part-time studies in mining technology  offers courses in the spring and fall. Contact faculty and advisors  for further information.

Have you found a book, website, or course about the technical aspects of mining that would be useful to investors? Please share it with us and other readers by leaving a comment.

As Patricia emphasized in her most recent blog – “2009 - The Year of the Ponzi” – this has been a tough year for investors.  The recession has hurt investors and virtually every Canadian to some degree. Signs indicate that we are crawling out of the economic malaise, and the recent Globe and Mail article headlined “Return of the highly confident investor ”  suggests more positive times ahead for investors. But it’s not surprising, that this time around, battered investors are taking a more cautious approach to where and how they invest their money. They are also less optimistic about what they should expect in return.

The Globe piece talks about the need for a long-term perspective in investing and the importance of a well-balanced portfolio, the recognition of the role that risk plays in investing and the need for realistic expectations.

Similar points of view are reflected in the advice given by a panel of international and national experts during the BC Securities Commission’s annual industry forum in October. Have a look and listen to what else the panel has to say in the segment, “Advice for risk-adverse investors ,”  just uploaded on YouTube.

The entire Capital Ideas conference  has been posted as well.

 A colleague received an email a few days ago flogging the wonders of FOREX – trading in the foreign currency exchange market. Here’s part of the email:

“You know, you can make Forex traders work for you giving you around 1% per day. Professional company offers managed Forex trading accounts. It means: average returns of 1% per trading day; almost no time and no trading skills required; protection against trading losses; real-time Forex trading sessions; full control of your profits and many other features to take the most of managed Forex trading accounts…”

My colleague forwarded the email to me with her realization that the one per cent a day return boasted about equates to roughly 30 per cent a month. As she puts it, “Talk about too good to be true!”

Now, I am not saying that this is never possible but is it likely that such returns are commonplace? I highly doubt it.

Before you get involved in the FOREX market, you should know the risks . We explain how complex and volatile this type of trading is and also warn people about FOREX scams.

Foreign currency trading is a favourite ruse of fraudsters to make claims and promises about exorbitant investment returns. Just recently, an Oregon woman  was sentenced to five years in jail for bilking $2-million US from 20 investors by promising them that she would generate profits for them in the FOREX market. It turned out she was running a Ponzi scheme for the most part. Closer to home, the Manna Ponzi scheme  also enticed investors with the promise of using FOREX as a method to generate “double-digit monthly returns.”

A few final notes about the email my colleague received: First, it was unsolicited. Second, there’s a mistake in the message.

“…many other features to take the most of managed Forex trading accounts…” Shouldn’t that be make?

Both are signs that it may be part of a spam campaign. Be careful.

Several years ago, we issued an Investor Alert that talked about the fact that income trusts were, in fact, not fixed income investments.  At that time, we were concerned that too many retirees were investing in income trusts because they thought that these products would provide ongoing income.

Recently, we decided to issue information regarding exchange-traded funds (ETFs).  In this case, we were concerned that people didn’t understand that this term is used to describe a whole category of products, some very risky, some not so risky. We pointed out that investors should determine what type of ETF they are considering and if it was a “leveraged” or “inverse” ETF, they should think twice.  Both of these products are better suited to professional investors rather than retail investors.  Professional traders use these short-term trading vehicles to speculate or to hedge other positions they hold.

If you know about products that are being introduced to retail investors that require a better understanding of its risk, please don’t hesitate to respond to this blog or to email us with that information.  We’ll take a look at the product in question, and if we also have concerns, we’ll issue information outlining the risks and outlining key information that will help an investor make an informed decision.

This is my final post as an InvestRight blogger. I am packing up and moving to Ottawa, our Nation’s capital. Thank you to our readers, supporters, and critics for making my experience as a blogger for InvestRight such a worthwhile endeavor. I look forward to watching the community grow and evolve. Before I sign off, I want to share just one more thought.

Last week I read an article in the Financial Post: Small investors flock to forex . It raised a concern that investors looking for higher returns may turn to the FOREX market without first being aware of the risks and even worse, the FOREX market may provide a breeding ground for frauds and scams. If you are considering the FOREX market, do your research to understand the risks and spot the scams. As a starting place, you can read our investor watch: Investing in FOREX.

Adieu and best wishes.

- Anthony

There are guidelines for making RRSP contributions  and we all need to follow them to benefit fully from this time-honoured tax-deduction vehicle. But the one thing you don't need to know by the contribution deadline on March 2 is the final form of your investment. Don't let yourself feel pressured by the RRSP investment advertising that's in full swing this month. What you "do" is up to you. If you aren’t ready to decide what type of investment to make, you can still make your RRSP contribution and leave it in cash, in the form of a deposit or cash balance at a financial institution or registered securities firm. Then, when you’re ready, you can choose the type of investment that fits your investment strategy.

Canada  Revenue Agency sets your contribution limit for 2008  based on your 2007 and previous years’ returns. You can find how much unused contribution room you have on your 2007 Notice of Assessment, or through CRA’s Tax Information Phone Service . To see what your 2008 contribution will put back in your pocket this year, just plug your gross income, contribution amount, and the province where you live into Morningstar Canada’s RRSP calculator .

Have you read the December 17, 2008 report  on product suitability by the Joint Standing Committee  on retail investor issues? Three questions were put to participants:

1. What information about an investment does your advisor give you before and after you buy it? Is there any other information you would like?
2. Should specific investment products be prohibited from sale to the public, or should all products be available to investors and investors be allowed to make their own choice?
3. Should regulators focus on regulating specific products or on regulating how products are sold and distributed?

It’s a great idea to reach out to retail investors to get their feedback and I hope that more people participate in future consultations. It seems that the focus of the report is how can regulation help ensure that investors are presented with suitable investments.

There is no doubt that regulation is necessary to protect investors. However, as with other important social issues such as recycling and drunk driving, change requires both regulation and education. As investor education is my line of work, and the topic of this blog, I kept approaching the report from the context of how can education help investors decide if an investment is suitable.

Here’s a summary of the questions and ideas that came to me as I read the report:

Investment information
Having the right information about an investment is key to ensuring it’s suitable for your needs. If you know what information you want, are you getting it? If not, why not? Can any of our existing investor education tools such as the worksheets in our Guide to investing help you get the information?

Would interviews with advisors about their investment review processes and about how to best get answers to your questions help? How about step-by-step tutorials on due diligence, background checks, and how to read investment documents such as annual reports?

If you’re unsure what information you want, then where do you look for help? Does the information we provide on particular investments such as mutual funds or principal protected notes (PPNs) provide a good starting point for such products?

Back to basics, but in a different way
Perhaps we need to delve deeper into the basic concept of suitability. Should we develop more material or tools to show you what suitability really means to you and how you can apply it? How about a program or application to help you better understand and apply the concepts of investment objectives and risk tolerance?

An investing step you can take now
As regulation and education evolve to address investor’s needs, remember there is one action you can take right now to better protect yourself—Don’t buy an investment unless you truly understand how it works. Insist that your advisor provides you with investments you understand and that fit your investment profile.

Making time to invest right
If you think you don’t have time to learn about investing or to review each investment opportunity, you might want to look at how you allocate your time. Dale summed it up nicely in his comment to Affinity at the heart of Madoff mayhem:

It amazes me that people can spend days pouring over a TV purchase, agonizing over every detail and grinding for a $100 savings, yet throw $20,000 - $30,000 into stocks or mutual funds on a quick phone call.

Also, you can be sure that the time and energy you would have to spend on trying to make up for losses due to an unsuitable investment would be much more than the extra time you need to check it out before you invest.

Thoughts? Suggestions? Questions? Leave a comment.