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12-11-2006, 03:50 AM
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#1
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Dryer sheet wannabe
Join Date: Sep 2006
Posts: 13
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Commodity investment
Dear My friends:
I am curious whether you put "commodity funds or ETF" in your investment portfolio. Currently it is "0" in my portfolio. I need your advise to know whether it is worth to add some in portfolio due to uncorrelated to equities.
How much is suggested to add in? If there are books or articles suggested, it would be more appreciated. :P
Dasinsin
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12-11-2006, 04:28 AM
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#2
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Thinks s/he gets paid by the post
Join Date: Mar 2006
Location: Houston
Posts: 4,337
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Re: Commodity investment
If you invest in the typical index funds discussed here -- large caps, small caps, total market and international. You already have a component for commodities in that oil, mining and agricultural companies are in those indexes. If your question is "does anyone overweight commodities," my answer is no but I'm sure some people have energy or precious metal funds.
__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
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12-11-2006, 05:22 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2005
Posts: 6,115
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Re: Commodity investment
i use gsg, pcrdx and dbc switching among them from time to time
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12-11-2006, 05:38 PM
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#5
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Full time employment: Posting here.
Join Date: Mar 2005
Location: Northern, Florida
Posts: 925
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Re: Commodity investment
"Work Less, Live More" suggests 4% in commodities for the "cornucopia" portfolio.
__________________
Retired in 2006 at age 49.
"Who among us is smart enough to learn from the mistakes of others?" - Voltaire
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12-11-2006, 07:36 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,455
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Re: Commodity investment
My commodity fund, PCRIX, is 1.8% of my portfolio. The YTD is only 5%.
__________________
May we live in peace and harmony and be free from all human sufferings.
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12-11-2006, 07:49 PM
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#7
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Full time employment: Posting here.
Join Date: May 2006
Posts: 696
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Re: Commodity investment
Personally, I don't think you need it.
__________________
Oh, you hate your job? Why didn't you say so? There's a support group for that. It's called EVERYBODY, and they meet at the bar.--Drew Carey
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12-12-2006, 02:35 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2005
Posts: 6,115
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Re: Commodity investment
i agree you probley dont need it but non the less i like it because it adds a little excitement to my portfolio. im probley about 3-4% in commodities plus i call it my gas rebate program.
never forget we are only 1 geo, political or storm away from 4.00 gas again. at least i get something back as it rises.
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12-12-2006, 05:32 AM
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#9
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Re: Commodity investment
Adding 5 to 10% of PCRIX or DJP is almost a no-brainer to any bond and equity portfolio, IMO. Go read the research.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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12-12-2006, 05:52 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Jul 2005
Posts: 2,375
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Re: Commodity investment
I'm in DBC - Powershares Deutsche Bank Commodity Index Tracking Fund - it's an ETF
Tracks light sweet crude, heating oil, aluminum, corn, wheat and gold
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12-12-2006, 05:57 AM
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#11
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Dryer sheet wannabe
Join Date: Nov 2005
Posts: 12
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Re: Commodity investment
4% CRSOX
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12-12-2006, 06:33 AM
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#12
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Moderator
Join Date: Sep 2006
Posts: 4,029
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Re: Commodity investment
OK, can someone educate me here? I'm not well versed in commodities.
What is the difference between a fund like PCRIX and PRNEX (T. Rowe Price New Era). Both are listed as specialty-nat resources. Does that make PRNEX a commodity fund
__________________
simple girl
less stuff, more time
(55, married; Mr. Simple Girl, 59. FIRED 12/31/19!)
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12-12-2006, 06:51 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Re: Commodity investment
Quote:
Originally Posted by simple girl
OK, can someone educate me here? I'm not well versed in commodities.
What is the difference between a fund like PCRIX and PRNEX (T. Rowe Price New Era). Both are listed as specialty-nat resources. Does that make PRNEX a commodity fund
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PRNEx invests in stocks of companies that produce natural resources. PCRIX invests directly in the commodities themselves via commodity futres contracts. I think PCRIX is a much better way to go.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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12-12-2006, 06:56 AM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 14,183
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Re: Commodity investment
~5% of port in PCRIX.
__________________
Have Funds, Will Retire
...not doing anything of true substance...
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12-12-2006, 08:42 AM
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#15
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Moderator
Join Date: Sep 2006
Posts: 4,029
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Re: Commodity investment
Quote:
Originally Posted by brewer12345
PRNEx invests in stocks of companies that produce natural resources. PCRIX invests directly in the commodities themselves via commodity futres contracts. I think PCRIX is a much better way to go.
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Thanks brewer. Can you explain why you think PCRIX is a better way to go?
__________________
simple girl
less stuff, more time
(55, married; Mr. Simple Girl, 59. FIRED 12/31/19!)
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12-12-2006, 08:54 AM
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#16
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Re: Commodity investment
Quote:
Originally Posted by simple girl
Thanks brewer. Can you explain why you think PCRIX is a better way to go?
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PCRIX (or DJP for taxable accounts) is better for a couple of reasons:
- Nat resource companies can hedge out commodity exposure, lever up, do stupid acquisitions,and go BK. This is not an issue with PCRIX/DJP because they just have long commodity futures exposure.
- In a market crash or runaway inflation scenario, nat res stocks can crash with all the other stocks. Commodities traded on the futures markets don't have these issues.
There are other reasons that are very technical, but the above is the main reasons. Commodity exposures help offset inflation, which you are at risk of by owning stocks and bonds, and they offset the risk without introducing the potential pitfalls of nat res stocks.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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12-22-2006, 09:55 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Aug 2004
Location: Houston
Posts: 1,448
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Re: Commodity investment
Brewer, how is DJP affected by FX changes in the value of the dollar? That is to say, does it offer any protection against a declining USD? I assume the foward contracts in DJP are dollar-denominated. If we assume everything else stays constant but the value of the dollar drops, the price of a global commodity expressed in USD is going to rise, so you would see an increase in the value of DJP. Is that logic right?
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12-22-2006, 10:02 AM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Re: Commodity investment
Quote:
Originally Posted by soupcxan
If we assume everything else stays constant but the value of the dollar drops, the price of a global commodity expressed in USD is going to rise, so you would see an increase in the value of DJP. Is that logic right?
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Correct. If you compare the price of gold in USD and JPY over the last 5 years, you get a very, very different picture.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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12-22-2006, 11:52 AM
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#19
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Thinks s/he gets paid by the post
Join Date: Aug 2004
Location: Houston
Posts: 1,448
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Re: Commodity investment
Given your response, could I be taking on too much FX risk by holding 10% of an unhedged foreign bond fund (begbx) plus 10% of DJP? Where do you cross the line from efficient portfolio diversification into over-weighting/speculation?
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12-22-2006, 11:56 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Re: Commodity investment
Quote:
Originally Posted by soupcxan
Given your response, could I be taking on too much FX risk by holding 10% of an unhedged foreign bond fund (begbx) plus 10% of DJP? Where do you cross the line from efficient portfolio diversification into over-weighting/speculation?
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I wouldn't think it'd be too much currency risk, considering how much stuff we import into this country.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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