At times when I mention the word commodities I may as well use a four letter foul word because investors have mentally linked commodities with speculators, high risk, hocus-pocus manipulators of the market. The sector is the only one that in normal times is a decent hedge against inflation and a pure diversification from stocks and bond assets. The following are a list of commodities in the DJ-UBS Commodity Index. Buying one or two of the industries may pose unrealized volatility but by buying an active managed fund that mimics the index itself (much like any active managed index) the investor gets exposure across a wide range of products.
Water is one commodity not represented in the index but agricultural products along with most of the energy products and basic metals are. Much recently has been reported on higher food prices, cotton reaching highs not seen since the Civil War and precious metals soaring. Owning just one commodity could put an investor at risk; owning all creates a diversified mix that fits in just about every investor’s portfolio.
- Natural Gas
- Crude Oil
- Unleaded Gas
- Heating Oil
- Live Cattle
- Lean Hogs
- Wheat
- Corn
- Soybean
- Aluminum
- Copper
- Zinc
- Nickel
- Gold
- Silver
- Sugar
- Cotton
- Coffee
- Vegetable Oil
- Soybean Oil
As an investor if you believe in inflation, higher food prices along with sustainable energy costs investing in the commodity index using an active managed mutual fund makes sense to round out a portfolio. The myths and manipulation of certain commodities have always come regarding a singular product or industry such as the Hunt Brothers attempting to corral the world’s silver market.
Unlike my antipathy of rebalancing an equity stock portfolio a commodity allocated fund using rebalancing smoothes out the risk from speculation. As always, if you have questions and interest call or e mail me.
Call Paul @ 877 783 7080 or write him at pstanley@westminsterfinancial.com. Share this blog and idea with people that are concerned about their money.
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