Comments on: Diversifying Portfolio with Commodities Futures Fund http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html like a friend telling you about money ... Thu, 19 Nov 2009 19:44:17 -0600 http://wordpress.org/?v=2.8 hourly 1 By: TFB http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html/comment-page-1#comment-1339 TFB Fri, 16 Jan 2009 00:47:28 +0000 http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html#comment-1339 Arvind - Fidelity, Schwab, E*Trade, and TD Ameritrade all have PCRDX as a NTF fund. Arvind – Fidelity, Schwab, E*Trade, and TD Ameritrade all have PCRDX as a NTF fund.

]]> By: arvind http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html/comment-page-1#comment-1338 arvind Fri, 16 Jan 2009 00:19:22 +0000 http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html#comment-1338 What is the best way to buy these NTFs? Vanguard charges a $30 a year fee for their brokerage component. Zecco does not offer this? Any free/cheap option to buy this fund? What is the best way to buy these NTFs? Vanguard charges a $30 a year fee for their brokerage component. Zecco does not offer this? Any free/cheap option to buy this fund?

]]> By: Kevin http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html/comment-page-1#comment-1289 Kevin Tue, 06 Jan 2009 22:20:39 +0000 http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html#comment-1289 Correlation is often misunderstood and not applied appropriately. I am not and don't profess to be an expert, but I do know that you will get widely different results depending on several factors. For example if you calculate the correlation between Dow Jones AIG Commodity Total Return Index and S&P 500 from 2/28/91 thru 11/30/08 using monthly returns you will get 0.19, using quarterly returns 0.24. If you calculate the correlation using the trailing 12 months it is 0.43, trailing 36 months it is 0.42, and trailing 60 months 0.39. If you use the 12 month moving average it is 0.09, 36 moving average it is 0.10, 60 month moving average it is 0.10. Correlation is often misunderstood and not applied appropriately. I am not and don't profess to be an expert, but I do know that you will get widely different results depending on several factors. For example if you calculate the correlation between Dow Jones AIG Commodity Total Return Index and S&P 500 from 2/28/91 thru 11/30/08 using monthly returns you will get 0.19, using quarterly returns 0.24. If you calculate the correlation using the trailing 12 months it is 0.43, trailing 36 months it is 0.42, and trailing 60 months 0.39. If you use the 12 month moving average it is 0.09, 36 moving average it is 0.10, 60 month moving average it is 0.10.

]]> By: TFB http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html/comment-page-1#comment-1284 TFB Fri, 02 Jan 2009 20:45:54 +0000 http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html#comment-1284 comate - I didn't get the impression from reading that article people could end up paying tax from gains from commodity ETFs in their IRA. The article made no mention of IRA at all. I'm not even sure it is accurate that people will receive a K-1 form from their commodity ETF. comate – I didn't get the impression from reading that article people could end up paying tax from gains from commodity ETFs in their IRA. The article made no mention of IRA at all. I'm not even sure it is accurate that people will receive a K-1 form from their commodity ETF.

]]> By: comate http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html/comment-page-1#comment-1282 comate Fri, 02 Jan 2009 19:51:25 +0000 http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html#comment-1282 I was just wondering if you have considered tax consequences of buying commodity ETF, e.g., http://seekingalpha.com/article/112546-commodity-etfs-the-tax-difference It seems that people could end up paying tax for (some) gains from commodity ETFs in their IRA accounts. I could be wrong though :) I was just wondering if you have considered tax consequences of buying commodity ETF, e.g.,

http://seekingalpha.com/article/112546-commodity-etfs-the-tax-difference

It seems that people could end up paying tax for (some) gains from commodity ETFs in their IRA accounts.

I could be wrong though :)

]]> By: TFB http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html/comment-page-1#comment-1257 TFB Tue, 23 Dec 2008 19:45:38 +0000 http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html#comment-1257 Jim - Like I said in my reply to simplesimon, experts have different opinions. For each argument for it, you can find argument against it, and vice versa. I'm still new to this and I'm only getting my toes wet, not jumping in blindfolded. Of course commodities are related to economic activities, but they are not necessarily related to the stock market. We have stock market declines to the tune of 40% - 50% in 2008. The economic activities certainly didn't decline by 40% - 50%. Correlations change from time periods to time periods. If they have become correlated now, who knows whether it will stay that way or become uncorrelated in the future? For the time being, I'm willing to accept the arguments from the pro- camp. Jim – Like I said in my reply to simplesimon, experts have different opinions. For each argument for it, you can find argument against it, and vice versa. I'm still new to this and I'm only getting my toes wet, not jumping in blindfolded. Of course commodities are related to economic activities, but they are not necessarily related to the stock market. We have stock market declines to the tune of 40% – 50% in 2008. The economic activities certainly didn't decline by 40% – 50%. Correlations change from time periods to time periods. If they have become correlated now, who knows whether it will stay that way or become uncorrelated in the future? For the time being, I'm willing to accept the arguments from the pro- camp.

]]> By: jimslade http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html/comment-page-1#comment-1256 jimslade Tue, 23 Dec 2008 15:30:15 +0000 http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html#comment-1256 TFB- What do you say to the argument that commodities are now correlated with stocks, and are thus not really another asset class in and of themselves for diversification? I've read a couple articles in the last month or so that have commented that people thought they were diversifying into commodities only to find that they've acted in concert with the overall economy. After all, aren't commodities just the raw input for all of the companies that you could invest in? (ie, buying grain is just buying the supply chain of a General Mills or an Anheuser Busch?) I understand commodities have been thought to be a hedge against inflation, but then there are articles like this: http://financetrends.blogspot.com/2007/03/stocks-and-commodities-positively.html thoughts? jim TFB-
What do you say to the argument that commodities are now correlated with stocks, and are thus not really another asset class in and of themselves for diversification?
I've read a couple articles in the last month or so that have commented that people thought they were diversifying into commodities only to find that they've acted in concert with the overall economy.
After all, aren't commodities just the raw input for all of the companies that you could invest in? (ie, buying grain is just buying the supply chain of a General Mills or an Anheuser Busch?)
I understand commodities have been thought to be a hedge against inflation, but then there are articles like this:
http://financetrends.blogspot.com/2007/03/stocks-and-commodities-positively.html

thoughts?
jim

]]> By: Jonathan http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html/comment-page-1#comment-1235 Jonathan Tue, 16 Dec 2008 21:34:21 +0000 http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html#comment-1235 I've been thinking of doing the same at today's gloomy prices, but I am still lazy about adding asset classes and complexity. On the other hand, I am worried about sudden inflation more... I've been thinking of doing the same at today's gloomy prices, but I am still lazy about adding asset classes and complexity. On the other hand, I am worried about sudden inflation more…

]]> By: TFB http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html/comment-page-1#comment-1234 TFB Tue, 16 Dec 2008 18:05:12 +0000 http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html#comment-1234 simplesimon - As I educate myself more on this subject, I think there are both a diversification benefit and speculation in commodities futures. I don't want to do it when it's really hot because I don't want to pay a good price premium for the speculation component. Think International Real Estate. It was a hot topic last year. You don't hear a thing about it now. Right now the diversification benefit of commodities futures is still there. Only the price is cheaper. It's hard to tell how much is diversification and how much is speculation. I only hope the speculation component isn't as much as it was before. I'm still new to this. Experts always have different opinions. Just the other day there was an <a href="http://www.hardassetsinvestor.com/features-and-interviews/1/1316-tough-outlook-for-commodity-indexes.html" rel="nofollow">article</a> about commodities futures having a -20% outlook in the next 12 months. Who knows what will happen. I'm starting slow. simplesimon – As I educate myself more on this subject, I think there are both a diversification benefit and speculation in commodities futures. I don't want to do it when it's really hot because I don't want to pay a good price premium for the speculation component. Think International Real Estate. It was a hot topic last year. You don't hear a thing about it now. Right now the diversification benefit of commodities futures is still there. Only the price is cheaper. It's hard to tell how much is diversification and how much is speculation. I only hope the speculation component isn't as much as it was before. I'm still new to this. Experts always have different opinions. Just the other day there was an article about commodities futures having a -20% outlook in the next 12 months. Who knows what will happen. I'm starting slow.

]]> By: simplesimon http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html/comment-page-1#comment-1233 simplesimon Tue, 16 Dec 2008 17:32:12 +0000 http://thefinancebuff.com/2008/12/diversifying-portfolio-with-commodities-futures-fund.html#comment-1233 I'm trying to do a some more research myself on whehter or not to add CCFs to my portfolio. You write that you associated CCFs with speculation and that people were performance chasing and then went on to write about the crash so you bought in but didn't mention what changed your mind about CCFs. Is it because it is much cheaper relative to the SP500? Do you now believe that CCFs do offer a true diversification benefit? Thanks TFB. I'm trying to do a some more research myself on whehter or not to add CCFs to my portfolio.

You write that you associated CCFs with speculation and that people were performance chasing and then went on to write about the crash so you bought in but didn't mention what changed your mind about CCFs. Is it because it is much cheaper relative to the SP500? Do you now believe that CCFs do offer a true diversification benefit? Thanks TFB.

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