"Reduce your risk by doing as much research as possible".
I will agree to disagree. This is often more a curse than an asset. Often investors engage in over researching their company, especially if a negative and unexpected catalyst event occurs, and this results in over confidence. As they say, investors often ride their losesrs and sell winners to early. It is often better to look at a company is the most simple of ways as if you have to put on red rosy coloured glasses to simplify an over complicated situation, than you are likely holding a loser.
I have definately learnt this lesson the hard way many times in my investing career but it is important to continue learning from your mistakes. I have been in and out of the research world as an analyst (currently out) and I can tell you that the majority of people I speak to that are professionals are avoiding the resource industry permanantly. I have not looked at one resource stock as my time as an anlyst, although I do follow a number of them in my personal time. I think it was on YMYC (your money, your call the other day) where there was an expert talking about a gold ETF listed on the ASX (I think ASX?)(I avoid gold) and that from that index, only 3 of the stocks have gone up in value. The obvious reason is that the majority of them don't make any cash flow. You see the US S&P index increasing by over 13% for 2012, well look at the number of companies that generate cash flow and make a profit on that index compared to the ASX (heavily weigted by resource stocks) and people complain that the index has declined in value. I am not surpirsed why.
