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Re: Diversification Benefits of PCRDX Tested
Old 10-11-2005, 05:59 AM   #21
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Re: Diversification Benefits of PCRDX Tested

Yes, a different period would have shown a totally different result. The point is that their correlation is low.
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Re: Diversification Benefits of PCRDX Tested
Old 10-11-2005, 07:03 AM   #22
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Re: Diversification Benefits of PCRDX Tested

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Originally Posted by ESRBob
For those who do come down on the side of owning Commodities, wouldn't you rather be in PCRIX than PCRDX?* (I thought they were the same except that PCRIX has a fee about a half percent lower per year).* Didn't we work out last year that some of the big fund family supermarkets would let you buy into PCRIX at small (2.5k or so) minimum purchases?
I'd love to have access to PCRIX, but Schwab doesn't offer it to cheesy retail accounts and I can't justify opening up another account with someone else just t get access to pcrix.
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Re: Diversification Benefits of PCRDX Tested
Old 10-11-2005, 10:57 AM   #23
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Re: Diversification Benefits of PCRDX Tested

Yeah,
Either they changed the minimum at Vanguard or I am just mistaken -- the minimum there now for both IRA and regular brokerage accounts through Fund Access is 25k, not the 2.5k I thought I remembered. Sorry.
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Re: Diversification Benefits of PCRDX Tested
Old 10-11-2005, 12:44 PM   #24
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Re: Diversification Benefits of PCRDX Tested

Am I mistaken or doesnt PCRIX/RDX use TIPS as collateral for the commodities contracts purchased, therefore giving one the returns from TIPS as well as the commodities returns?

If thats the case, then the chart above only shows slightly less than half of the returns. Add an average of 3% a year for historic CPI and a couple of percentage points for the tips coupon.

My further understanding is that PCRIX and commodities in general give you superior protection from UNEXPECTED inflation. I'm not entirely sure what that means in detail, but it sure makes ya feel all warm and fuzzy.

After having seen plenty of very smart people over at Raddrs site do very detailed analyses, as pointed to by Brewer, it appears that adding a slug of commodities via PCRIX reduces volatility while increasing returns and SWR's. Adding a lot appears to statistically do you even better. I'm talking out of my pants pocket, but IIRC a portfolio of about half small cap value and half PCRIX produces a SWR in the 6-7% range, backtested, admitedly not very far back.

I dont have the big brass ones to go that far. Still pondering some PCRIX although every time I look at it, it seems to be too expensive and to have had a big runup, but when I look at it a few months later, its up even more. Go figure.

I'm not sure what Fama and French had to say in detail about commodities, but I doubt they were talking about an instrument like PCRIX/PCRDX. Thats sort of like taking someones opinion on NASDAQ stocks since 2000 and correlating that to ones overall opinion of equities over the last 100 years.
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Re: Diversification Benefits of PCRDX Tested
Old 10-11-2005, 02:18 PM   #25
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Re: Diversification Benefits of PCRDX Tested

Quote:
therefore giving one the returns from TIPS as well as the commodities returns?
Yup TIPS + Net gain on futures contracts

I didn't time (I did luck out though) b/c I wanted to be in the long haul
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Re: Diversification Benefits of PCRDX Tested
Old 10-11-2005, 02:45 PM   #26
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Re: Diversification Benefits of PCRDX Tested

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Originally Posted by ()

I'm not sure what Fama and French had to say in detail about commodities, but I doubt they were talking about an instrument like PCRIX/PCRDX.

actually they were, they mentioned it by name. But like I said, we're already re-beating the dead horse.

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Re: Diversification Benefits of PCRDX Tested
Old 10-11-2005, 08:56 PM   #27
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Re: Diversification Benefits of PCRDX Tested

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actually they were, they mentioned it by name. But like I said, we're already re-beating the dead horse.
Dang...I didnt get to smack the horse even once. Guess thats the penalty for baby duty eating up all of my spare time.

Having not read their study, I'm at a disadvantage to comment on whether I agree with it or not. While I dont own any of the commodities fund, I believe I've seen enough information and analysis to believe they're beneficial in at least small amounts for diversification purposes or at least for reducing volatility.

Until enlightened with whatever fama and french had to say, while they're smart guys I suspect theres a misunderstanding or mismatch of some kind involved.
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