commodity ETF questions

[joesxm3]

I searched the forum using google and saw some posts from a year or two ago that were recommending PCRIX, DJP and DBC as ways of getting a commodity exposure in your asset allocation.

Are these still the good ones or have new ETF's come out since then?

I saw the DJP is an exchange traded note so it is tax-wise better in taxable account.

Given the run up in commodities is it a bad time to be buying some? Should I wait until they hopefully drop sometime in the next few years?

I intend to increase my REIT allocation by buying more VNQ and bought about 1/3 of what I plan to today. Any thoughts on the timing? I am assuming that if I want REIT for the long term now is a better time to be buying REIT than commodities if you believe in the buy sort of near the bottom philosophy.

Thanks in advance for the advice.

 

[mathjak107]

i like gsg

 

[brewer12345]

I will decline to speculate as to whether today is a good time to buy commodities. I personally have a hard time mustering up much appetite for them at these levels in what the press screams from the rooftops is a slowing economy, but nobody knows what markets will do next.

As for the vehicles in question, PCRIX/PCRDX tracks the DJ-AIG index and is collateralized with TIPS. DJP is similar, but is collaterlaized with t bills. PCRIX is messy for tax purposes, but is a straight mutual fund. DJP is (currently, anyway) much more tax efficient, but is technically a senior unsecured bond issued by Barclay's (a large British bank). So you are taking credit risk with DJP (probably not much, but who knows).

DBC tracks a different index and I believe is collateralized with t bills. Its a custom index dreamed up by Deutsche Bank. Its a straight mutua fund.

GSG tracks the Goldman Sachs commodity index, which has a much heavier weighting to energy than the DJ-AIG index (DJ-AIG has more ags and metals). Its a straight mutual fund.

I tend to prefer the DJ-AIG index simply because it includes heavier weightings of non-energy commodities and you theoretically get more diversification. YMMV.

 

[RonBoyd]

or have new ETF's come out since then?

Perhaps... ETF Ticker Symbol Guide. See page 4.

i like gsg

Except for the Expense Ratio... and the Volume.

 

[CitricAcid]

On the timing, it is very tough to predict (you may have heard this before) the perfect market-timing and the future price movements. If you feel that you want commodities in your portfolio, as part of your AA, I would suggest buying them right away. If it seems too volatile, especially considering their extremely high prices right now, dollar cost average into commodities over time until it reaches the percentage of your AA that it deserves.

 

[RonBoyd]

See also:

Home - Hard Assets Investor

 

[ziggy29]

I'd look for three primary components: energy, metals and ag.

I'd also suggest that if someone wanted to further diversify an anti-dollar bet, a little exposure to other currencies (such as Swiss francs, FXF) might also fit the bill. Anyway, I doubt an average investor should be more than about 10% in these things, total, maybe 15% if can strap it in and enjoy the ride and are more concerned about inflation protection than capital growth.

 

[brewer12345]

I'd look for three primary components: energy, metals and ag.

I'd also suggest that if someone wanted to further diversify an anti-dollar bet, a little exposure to other currencies (such as Swiss francs, FXF) might also fit the bill. Anyway, I doubt an average investor should be more than about 10% in these things, total, maybe 15% if can strap it in and enjoy the ride and are more concerned about inflation protection than capital growth.

Non-USD bond funds are worthwhile diversifiers, IMO, and they are like watching paint dry. I own or have owned in the past: BEGBX, GIM, FAX
There are many others as well.

 

[Jessica08]

I searched the forum using google and saw some posts from a year or two ago that were recommending PCRIX, DJP and DBC as ways of getting a commodity exposure in your asset allocation.

Are these still the good ones or have new ETF's come out since then?

I saw the DJP is an exchange traded note so it is tax-wise better in taxable account.

Given the run up in commodities is it a bad time to be buying some? Should I wait until they hopefully drop sometime in the next few years?

I intend to increase my REIT allocation by buying more VNQ and bought about 1/3 of what I plan to today. Any thoughts on the timing? I am assuming that if I want REIT for the long term now is a better time to be buying REIT than commodities if you believe in the buy sort of near the bottom philosophy.

Thanks in advance for the advice.

If you are interested in commodity ETFs, there are many that you can choose from today. If you check out the below link, you can find a good list to choose from. I hope this helps!
Asset Class: Commodities ETFs | ETF MarketPro

 

[joesxm3]

Thanks to everyone for their input.

One further question is how does the collateralization mechanism of the ETN fit into the picture? Does a change in the value of the TIPS or T-BILL affect the value of the ETN?

For example, if I want to buy the commodity ETF or ETN to protect against inflation and I think that inflation will make interest rates go up wouldn't increasing interest rates make the value of the T-BILLs go down? Would the fact that PCRIX uses TIPS be significant?