Beginners Guide: Learning from 2023 Resource Investing Mistakes to Craft a Path for Improved Returns

5 Key Takeaways from My 2023 Resource Investing Review and 2024 Outlook

• Taking profits during frenzied markets is key
• Align the company cycle with the market cycle for better timing
• Patience is important; don't chase share prices
• Use level 2 data and interactive brokers for advantage
• Create investing rules and stick to them

It's that time of year again where I reflect on what went right and wrong with my investments in 2023, and come up with 5 ideas for more successful resource investing in 2024. With commodity cycles prone to volatility, examining past mistakes and mapping a careful path forward is key for investors looking to navigate the sector profitably. I love learning from my mistakes. No matter how embarrassing, no matter if I have to take a loss and no matter if I have to acknowledge I'm not as smart (or lucky) as I think I am.

What Went Wrong in 2023

A key mistake was not taking enough profits during the exuberance of frenzied bull markets like that seen in 2020. I needed to be better at selling during the frenzy. In hindsight, the stock I sold in the 2020 mania was moved into new opportunities but I should have allocated more to real-life things outside the sector, like paying down my mortgage. There is no better feeling than being mortgage-free I am told!

Coming into 2023 I was still too exposed to junior companies that retreated sharply when the bull market abated. I should be better with my timing. A key learning is better-aligning company cycles with market cycles. Explorers without money struggled. Even if they could raise money it cost them more as most stocks were at 12-24-month lows. If these cycles are aligned, and you have full recognition of where that company is and where the market is then you can make the timing aspect work out much better for you.

What Went Right in 2023

Despite a brutal 2022, the portfolio fared decently in 2023. As is probably normal with most investors, a couple of successful new positions combined with cutting losers early before they declined further saved the day. Luckily I decided early on that I didn't want to ride the losers down for fear of admitting I was wrong or having to take the loss. Something I will do again if the situation arises. As soon as the market rolled over I was very happy that I did and it just shows moving forward I need to cut things that aren't working as soon as possible and not wait.

Patience has also paid off, I sat on my hands through most of 2022 and 2023 as falling knives were everywhere. Restraint during such markets is a wise strategy. Sometimes it's wise to sit on your hands and in 2022 and 2023 we had companies that were putting out good news flow and their share prices were selling off they were being used as liquidity events and when you see that sort of price action happen. I think that's a great time to slow down with the market.

2024 Investing Tips

5 recommendations for improving resource investing results in 2024

1. Use level 2 market data. This reveals vital information like pending orders above and below the bid-ask spread to properly gauge supply and demand. It's invaluable" for only $30-50 per month.
2. Open an Interactive Brokers account for easier access to Canadian junior companies on native exchanges with maximum liquidity. The ability to trade cross-border also allows for arbitrage opportunities.
3. Write a one-page investment thesis for every company you own outlining valuation, price catalysts, and an exit target. This crystallizes your reasoning and catches over-emotional decisions. Price targeting is not something that you should make up as you go along. It's too emotional a ride.
4. Read "Managing Oneself" by Peter Drucker and "Seeking Wisdom" by Peter Bevelin to grow self-awareness around biases and create a framework for decision-making amid volatility.
5. Create 10 investing rules that fit your risk tolerance and competencies then stick to them no matter what. This keeps you grounded when emotions like greed or panic set in. Include rules around valuation discipline, adding to positions methodically, and selling at pre-set targets.

Actionable Advice for Investors

• Use fresher data from level 2 platforms to inform buy/sell decisions
• Access better liquidity and arbitrage potential with Interactive Brokers
• Maintain written investment theses to enforce valuation and selling discipline
• Read books boosting self-awareness around biases impacting decisions
• Craft personalized investing rules aligned to your competencies and risk appetite

I wanted to share my thoughts and process to say, that investing is tough at the best of times. It's ok to admit that none of us knew that the market was going to go down for so long and many of us could have played it better. And it is important to learn from that. Now is not the time to blindly hope that luck will be on your side to make you whole again. Set up a strategy which meets your risk appetite. There is lots of good advice on investing strategy on www.cruxinvestor.com

For me, stepping back objectively to assess what went right and wrong in prior years is a useful exercise for investors looking to enhance performance. Be honest with yourself when reviewing the data. It's your money and your decisions. No one else is to blame. Working hard to investor your money is also about working hard to protect your money. Key lessons like selling amidst greed, restraint during downtrends, targeting value, and filtering decisions through a personalized framework focused on core strengths can all help contribute to improved returns. Continual learning and adaptation focused on past mistakes and new tools remain vital for successfully navigating the volatility inherent to the resource sector.