Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
commodity or commodity ETF question
Old 09-06-2021, 06:53 AM   #1
Recycles dryer sheets
Ready-4-ER-at-14's Avatar
 
Join Date: Feb 2011
Location: chicago
Posts: 484
commodity or commodity ETF question

I was thinking about commodity type exposure maybe getting a commodity ETF and was checking the forum here for a thread and it listed a thread that was 485 days old and site suggested I start a new one rather than adding to it.

I've been simplifying things and finally got the limited partnerships out of my taxes finding that the tax forms often came way after I had filed and were often modified even when I got them. I'd like to file asap this year as it will reduce our Medicare costs significantly when applied.

As I was reading about commodity ETFs I found that there were many tax situations for them. Some of them seemed to be taxable or potentially taxable even in an IRA or ROTH IRA. Some of the ETFs seemed to do the taxable portion is a foreign subsidiary which affected and simplified the taxes for US customers.

Does anyone use them or something else for commodity exposure and can suggest some without tax complications or delays.
Ready-4-ER-at-14 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-06-2021, 01:01 PM   #2
Thinks s/he gets paid by the post
 
Join Date: Jul 2003
Location: Pasadena CA
Posts: 3,180
Interested in any responses, I don't have an idea how commodities would fit in an AA. Do you hold a specific % of an AA and rebalance to capture diversification benefit? AFAIK they do not pay dividends and I wouldn't know when to trade them. I would like as asset to have a buy & hold benefit. I understand them as a hedge for producers/consumers as insurance but not as a financial investment. Still a LOT of money is invested, made and lost in commodities and I would love to know how to capture some of it.
__________________
T.S. Eliot:
Old men ought to be explorers
yakers is offline   Reply With Quote
Old 09-06-2021, 02:35 PM   #3
Recycles dryer sheets
 
Join Date: Jan 2020
Posts: 146
I personally use XLB (materials). It covers materials side of commodities so not very broad. No schedule k(s) to deal with.
yhoomajor is offline   Reply With Quote
Old 09-06-2021, 10:34 PM   #4
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
One thing to watch for is that some of them could generate a K-1 form, which can be a hassle and delay tax filing. Other than that, I don't have a problem with 3-5% of an asset allocation going to commodities as an inflation hedge.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
ziggy29 is offline   Reply With Quote
Old 09-07-2021, 06:40 AM   #5
Recycles dryer sheets
Ready-4-ER-at-14's Avatar
 
Join Date: Feb 2011
Location: chicago
Posts: 484
Yes, ziggy29 I had read about the k-1s by some of them, which is what I am also trying to avoid. I had hit a mental fog about which number was associated with the k so took the lazy way out and got general about what i was trying to avoid. (knew for sure it was not k-9 woof : ) ).

Regarding yakers question about how much I was thinking more about just throwing some fixed income that was coming due with no preplanned use at it. I was looking at it as a possible inflation hedge that was less politically influenced than say TIPS. Probably no more than 3% for me.

Ty yhoomajor for a specific fund name (XLB). I'll check into it.
Ready-4-ER-at-14 is offline   Reply With Quote
Old 09-07-2021, 02:06 PM   #6
Thinks s/he gets paid by the post
gcgang's Avatar
 
Join Date: Sep 2012
Posts: 1,478
Rio & bhp.
__________________
In theory, there's no difference between theory and practice. In practice, there is. YB
gcgang is offline   Reply With Quote
Old 09-07-2021, 02:52 PM   #7
Recycles dryer sheets
 
Join Date: Sep 2021
Posts: 118
If commodities/commodity etfs are the right medicine for this, beware possible side effects! Devil in the details for sure. To get the inflation hedging, you may have to sacrifice income/price appreciation in the absence of inflation. Gold -- in various forms -- may provide better hedging than a broad commodity index, but I can't say it would be less politically influenced than tips. Historical commodity performance should be viewed skeptically as things have changed in this area from past
all4j is offline   Reply With Quote
Old 09-07-2021, 03:30 PM   #8
Recycles dryer sheets
 
Join Date: Dec 2012
Posts: 91
I found the below link to a Vanguard White Paper worth reading. Basically Commodities perform best (vs. stocks/bonds) in response to *unexpected* inflation.
https://advisors.vanguard.com/insigh...StTIPSCmbtInfl

Presumably TIPS political influence refers to the Fed bond purchases; if so, TIPS held to maturity will have returns that match inflation plus the coupon with no political influence. Of course, in todays world you have to pay a premium for TIPS resulting in a negative real return.
JT90505 is offline   Reply With Quote
Old 09-07-2021, 05:05 PM   #9
Thinks s/he gets paid by the post
Golden sunsets's Avatar
 
Join Date: Jun 2013
Posts: 2,394
We use XLB in our taxable and PRNEX in our IRA'S. I'd love to find an index fund for a "Broad Commodities Index Fund" which has a lower expense ratio than PRNEX. XLB is not broad enough. Our AA for Commodities is 5%.
__________________
"Luck favors the prepared mind"
Pasteur
Golden sunsets is offline   Reply With Quote
Old 09-09-2021, 02:10 PM   #10
Full time employment: Posting here.
BeachOrCity's Avatar
 
Join Date: Jun 2016
Posts: 875
One needs to distinguish between commodities themselves which is generally investing in futures of the specific commodity vs investing in a commodity producer like Oil production, coal miner, copper miner etc.

These producers have been very unloved for close to 10 years now and valuations are quite low in many areas. Some quickly went boom and back down to more reasonable levels like lumber. Others many say have room to run like Oil.

While you can do an etf, I think you need to hunt and find the plays where demand will continue and supply isnít easily increased without large amounts of capital and time.

Companyís trading for just a few years worth of cash flow are not hard to find.
BeachOrCity is offline   Reply With Quote
Reply

« Gamestop? | Blooom »

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
when are treasury bond etf's not treasury bond etf's ? mathjak107 FIRE and Money 1 07-20-2015 08:26 AM
Big Problems with commodity ETF funds MasterBlaster FIRE and Money 5 07-27-2010 01:09 PM
commodity ETF questions joesxm3 FIRE and Money 9 07-15-2008 08:04 PM
New ETF: Sudan-Free social ETF Olav23 FIRE and Money 2 06-28-2007 09:03 AM
Barclay's Commodity ETF Registered Olav23 FIRE and Money 0 07-27-2005 01:51 PM

» Quick Links

 
All times are GMT -6. The time now is 10:34 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2022, vBulletin Solutions, Inc.