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05-05-2011, 07:35 PM
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#1
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Dryer sheet wannabe
Join Date: Apr 2010
Posts: 23
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do you hold commodities?
I am reading Swedroe's book on "The only guide to alternative investments you ever need" and he makes a point that commodities offer good diversification benefit (i.e. can reduce risk without lowering overall return, and perhaps even raising the return some).
Do people here hold commodities in your portfolios?
He also makes a point that it is best to hold them in non-taxable accounts, which does not apply to me (since I don't have a choice to do that) so my only choice is whether or not to add them to my taxable account.
I have what I think is a pretty conservative allocation of 40% bonds, 40% stocks about 5-6% each gold and reit and some cash. Wondering if adding commodities makes sense for me? (since I already have gold)
if you hold commodities - what fund/etf/etn? and why? and how much (of your total pf?)
Thanks
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05-05-2011, 08:00 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Oct 2004
Location: LaLa Land
Posts: 4,698
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About 5% in PCRIX in tax advantaged.
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Work is something you do to get enough $ so you don't have to....Me.
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05-05-2011, 08:16 PM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,588
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Not exactly. I own companies that make money on commodities--oil companies, specifically. Commodities per se are speculative and therefore simply gambling. You are betting that the price will rise before your contract expires, and that you are smarter than the average commodity broker. If you make money on the trade, you have to do it all over again the next day.
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I have outlived most of the people I don't like and I am working on the rest.
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05-05-2011, 08:56 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Aug 2007
Posts: 1,224
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I don't hold any. My current slice and dice portfolio is complex enough and the potential risk reduction/reward is insufficient for me to add them. I certainly would not hold them in a taxable account - that would negate what little benefit may be had by owning them.
DD
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At 54% of FIRE target
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05-05-2011, 08:58 PM
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#5
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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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We have 3% in PCRIX.
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May we live in peace and harmony and be free from all human sufferings.
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05-05-2011, 10:12 PM
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#6
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Moderator Emeritus
Join Date: Dec 2002
Location: Oahu
Posts: 26,860
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Quote:
Originally Posted by Ed_The_Gypsy
Commodities per se are speculative and therefore simply gambling. You are betting that the price will rise before your contract expires
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... or that your chosen currency will fall...
I didn't hang on to my copy of Swedroe's alternative investment guide, but IIRC he only praised commodities for their lack of correlation-- not for their consistent market-beating gains.
We don't hold any commodities in our retirement portfolio. Just equities & cash.
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05-06-2011, 01:05 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Sep 2010
Location: midwestern city
Posts: 4,061
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I don't.
Quote:
Originally Posted by norisk
Do people here hold commodities in your portfolios?
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Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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05-06-2011, 05:08 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: Feb 2005
Location: Central MS/Orange Beach, AL
Posts: 9,072
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I did. But recently sold DBC due to a nice run up in price. Also trimmed a handful of stocks.
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Retired 3/31/2007@52
Investing style: Full time wuss.
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05-06-2011, 06:55 AM
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#10
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gone traveling
Join Date: Sep 2003
Location: DFW
Posts: 7,586
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I had ~ 5% in PCRIX, PRNEX and GLD, but cut back to ~ 2.5% a few weeks ago waiting to see what happens wrt QEII at end of June. Also, have some exposure with Permanent Portfolio and HRSTX, but that was not included in the aforementioned %s.
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05-06-2011, 07:30 AM
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#11
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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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Quote:
Originally Posted by 73ss454
About 5% in PCRIX in tax advantaged.
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+1
Recently topped my rebalance band, so I sold ~$5600 worth (moved to BSV). For once, my dirty market timing adherence to a rigorous asset allocation and rebalancing paid off...
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Have Funds, Will Retire
...not doing anything of true substance...
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05-06-2011, 07:49 AM
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#12
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Thinks s/he gets paid by the post
Join Date: Jul 2009
Location: North Scottsdale
Posts: 1,545
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Have GSP and DBC. Agree that it is a good diversification tool, although this week was a killer!
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FIRE'D in July 2009 at 51...Never look back!
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05-06-2011, 08:11 AM
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#13
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Thinks s/he gets paid by the post
Join Date: Jul 2003
Location: Pasadena CA
Posts: 3,346
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From The Economist Magazine: "Then there is the issue of higher commodity prices. Jeremy Grantham of GMO, a fund-management group, has compiled an equally weighted index of 33 commodities. This fell by 70% between 1902 and 2002 in real terms. It has regained all that ground in the past nine years. The rise of developing nations is generally deemed to explain this commodities boom. Since raw materials have greater weight in the inflation baskets of such countries, it makes sense for investors in China and India to buy gold as a hedge against this phenomenon."
OK, now if I had bought 10 years ago and had some good gains I would be patting myself on the back. But I didn't (and did OK) but I do not see adding commodities at this time. Maybe when everyone sells off and there are articles that commodities are horrible, it will be a better time to buy.
__________________
T.S. Eliot:
Old men ought to be explorers
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05-06-2011, 09:18 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: Jan 2007
Location: Independence
Posts: 7,298
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Not as many as yesterday - sold half our dab of USAGX yesterday - it sold at a buck and a half less than the price when I put in the order. Also sold a couple dental crowns yesterday for $105 - a sixth of what it cost to remove them from my head.
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05-06-2011, 09:35 AM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 7,677
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I have a 5% portfolio stake in junior miniing stocks. They benefit from commodity price increases but also from their discoveries (or not). The winners tend to outrun the losers by a considerable amount. But my last big winner, Corriente Resources was taken out early through acquisition and I have not reinvested that amount as yet so I am a little below my target weighting.
I stay away from commodities themselves because I consider options contracts to be high risk gambling. My approach is much more boring than that.
(BTW MF Global increased their margin requirements from 6% to 10% last week. That would be driving all equities down as investors scramble to sell to cover.)
__________________
For the fun of it...Keith
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05-06-2011, 10:23 AM
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#16
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gone traveling
Join Date: Apr 2011
Posts: 3,375
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7% in GLD. Half that when I bought. It's been one of the few good runs. 2% in Oneok natural gas piplines MLP. Very good return, pretty variable price. Their K-1 can be a bit of a pain for tax returns.
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05-06-2011, 10:34 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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I own US and international index funds....so I own commodities companies. I don't see the point in owning sector or individual commodities funds.
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05-06-2011, 11:27 AM
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#18
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gone traveling
Join Date: Apr 2011
Posts: 3,375
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Quote:
Originally Posted by nun
I own US and international index funds....so I own commodities companies. I don't see the point in owning sector or individual commodities funds.
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Index funds of what - commodities or broad range of stocks - and how much? They may not contain the %age one may want.
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05-06-2011, 11:51 AM
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#19
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Thinks s/he gets paid by the post
Join Date: Feb 2006
Posts: 4,872
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Quote:
Originally Posted by gerntz
Index funds of what - commodities or broad range of stocks - and how much? They may not contain the %age one may want.
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I have no % requirement for commodities related stocks.....I just buy the whole market
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05-06-2011, 01:13 PM
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#20
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Dryer sheet wannabe
Join Date: Apr 2010
Posts: 23
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Quote:
Originally Posted by MichaelB
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Thanks for all these useful links and to all others who replied. BTW, in the same book I mentioned Swedroe says that stocks of commodity producers do not behave like commodity prices, but move more aligned with other stocks, so in terms of diversification they are aparatenly not as good as commodities (according to what I understood his argument to be - stocks and commodities have negative correlations but stock sof commodity producers have possitive correlation with the overall market).
I do have some GLD and REITs already, so probably that is enough of a diversificaiton since there is no clear cut case for holding commodities (especially in a taxable account).
Thanks!
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