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Looking at Fidelity Select Natural Resources Fund (FNARX).....mainly because it has low expenses and has strong performance (although can be erradic). Natural Gas is also at a low and there are alot of sources that say that it is only going to go higher, and is become a larger player in America's everyday energy condumption..........
I think real assets/natural resources are a good place to be over the mid-to-long term, but I would level into them lightly rather than jumping in. I think it's probably the sector that I - personally - feel most comfortable with over the mid-to-long term, but it is a particularly volatile sector in a market that I think will continue to be volatile.
So, I do think that people should have some exposure to it. However, I would be very mindful of one's risk tolerance/comfort level.
I don't understand the article, or at least I don't think it's making the same point as your post. The article seems to say that America's fossil fuel supply is increasing and prices might continue to go down, so this will benefit fossil fuel *consumers* (airlines, shipping, heavy industry, etc.) but I don't see how this will help energy *producers*, who are faced with increasing supply, weak demand, and lower prices.
Also, assuming I'm misinterpreting this and energy is going to go up, can you say the same for mining companies? Vanguard's mining fund VGPMX is over -20% YTD so I'd think if any "real asset"/resources sector has upside potential, it would be the miners. Unless you think there are some key differences between these sectors?
I had lightened up on commodities, energy and materials awhile back and went heavy into utilities (16%). I recently cut utilities in half and I am now increasing my allocation to commodities, energy and the materials sectors.
If one were to check the broad sectors of the S&P 500 Index for the past 52 weeks the two most underperforming sectors are materials and energy. I have linked below a sector tracking chart for your easy reference. Select the time period you wish to view and watch how the sectors move around as a diferent time period is selected. I figure, a sector that has trailed the others for 52 weeks, from my thoughts, most likely has been oversold and now offers good value.
I thought I'd give an update on my recent redution to utilities, from 16% down to 8%, and with this I have, within the past three weeks or so, begun to increase my holdings in the energy, materials and commodities sectors. As of the July 27th market close, for the past 30 days utilities are up 3.5%, while the S&P GSCI is up 11.2%, my energy move is up 10.1% and my materials move is up 2.7%. So, as one can see based upon review of the gains overall this has been a positive move and the only one I have trailing so far is the materials move and it is trailing utilities by less than one percent. Within the portfolio I have not yet fully position all of the money yet as I am averaging in. My plan is to increase each area by about 2% and that would take enegy from the 10% range to 12% range, materials form from the 5% range to 7% range, and diversified commodities from the 3% range to 5% range ... and, with the other two percent left over ... cash to my pocket with some of it to pay taxes on the gains I have harvested.
In short words, I sold off some of my utilities that I felt had become expensive to purchase and were now overbought; and, with the sale proceeds I have begun to purchase assets that I feel have been oversold by investors and now would offer me a better opportunity for gain(s) going forward. When I loaded up on utilities I felt they had been oversold ... and, while I held them I collected good dividends as I waited for their appreciation in value. Same here with this recent move ... I'll collect a good income stream while I await appreciation.
My late father taught me through simple childhood lessons to position some of your invested assets to allow for market movement. And, most of all, be willing to take advantage of fear as it will not last forever. Buy when the markets have been oversold and be willing to sell some off when the market has become overbought. Utilities were oversold when I bought them and now from my thoughts they have become overbought ... So, I sold some of them off. Still, I am 5% overweight utilities (8%) as compared to the S&P 500 Index weighting (3%) ... and, within the Defensive Area I am also plus five percent over the Index. In addition, I am underweight the Sensitive Area with the exception being in communciation services where I am carrying a double weight; and, I am overweight the Cyclical Area through overweights in real estate and materials sectors.
Have a good weekend ... and, I wish all "Good Investing."
Hi Heathbob. Don't know your situation. If an active trader, than my comments won't apply ... World's been running out of energy about as long as I can recall. However, new sources are continually found as technology advances. And solar is real as evidenced by proliferation of devices on home rooftops - probably about where black & white TV was 50 - 60 years ago. Energy prices appear to spike and wane for no reason the average fella can comprehend. Just too darned complicated when you try to factor in exploration for new sources, geopolitics, currency movements, environmental regs, consumer preferences and U.S. govt policies - taxation & other. Big bets here are fraught with peril.
I view a small hold in energy related funds as a hedge against future serious dollar weakness. Keep about 7% so allocated in natural resource funds (energy normally being by far the largest component of these). Some years it has helped returns. Other years like this one it has hurt. Overall, it's been a "wash". Actually, many good diversified funds, like PRPFX and even OAKBX, maintain exposure to energy and that's what I'd recommend for most investors.
Natural resources are a key part of any portfolio - say 7-10% or so. However, with most people this is pretty much a fixed allocation as trading them is murder. I still have a tendency to nibble around the edges with momentum plays -with them or whatever. For example, I still have my pm play on albeit, I've reduced it significantly on the paper bullion side. And, as mentioned around here a few months back, still riding nat gas as very current mo play. Bought in at $2 or so and it's at $3.15 I believe. However, BOTH of these plays are with sh*ts and giggles money on the margin.
For the vast majority, I'd go with a nice natural resource fund and if you want to get cute, add a commodity fund . . . and call it good.
Comments
So, I do think that people should have some exposure to it. However, I would be very mindful of one's risk tolerance/comfort level.
Also, assuming I'm misinterpreting this and energy is going to go up, can you say the same for mining companies? Vanguard's mining fund VGPMX is over -20% YTD so I'd think if any "real asset"/resources sector has upside potential, it would be the miners. Unless you think there are some key differences between these sectors?
I had lightened up on commodities, energy and materials awhile back and went heavy into utilities (16%). I recently cut utilities in half and I am now increasing my allocation to commodities, energy and the materials sectors.
If one were to check the broad sectors of the S&P 500 Index for the past 52 weeks the two most underperforming sectors are materials and energy. I have linked below a sector tracking chart for your easy reference. Select the time period you wish to view and watch how the sectors move around as a diferent time period is selected. I figure, a sector that has trailed the others for 52 weeks, from my thoughts, most likely has been oversold and now offers good value.
http://www.sectorspdr.com/sectortracker/
Anyway, that is how I am playing it.
Have a good day ... and, "Good Invesitng."
Skeeter
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An update July 28, 2012
I thought I'd give an update on my recent redution to utilities, from 16% down to 8%, and with this I have, within the past three weeks or so, begun to increase my holdings in the energy, materials and commodities sectors. As of the July 27th market close, for the past 30 days utilities are up 3.5%, while the S&P GSCI is up 11.2%, my energy move is up 10.1% and my materials move is up 2.7%. So, as one can see based upon review of the gains overall this has been a positive move and the only one I have trailing so far is the materials move and it is trailing utilities by less than one percent. Within the portfolio I have not yet fully position all of the money yet as I am averaging in. My plan is to increase each area by about 2% and that would take enegy from the 10% range to 12% range, materials form from the 5% range to 7% range, and diversified commodities from the 3% range to 5% range ... and, with the other two percent left over ... cash to my pocket with some of it to pay taxes on the gains I have harvested.
In short words, I sold off some of my utilities that I felt had become expensive to purchase and were now overbought; and, with the sale proceeds I have begun to purchase assets that I feel have been oversold by investors and now would offer me a better opportunity for gain(s) going forward. When I loaded up on utilities I felt they had been oversold ... and, while I held them I collected good dividends as I waited for their appreciation in value. Same here with this recent move ... I'll collect a good income stream while I await appreciation.
My late father taught me through simple childhood lessons to position some of your invested assets to allow for market movement. And, most of all, be willing to take advantage of fear as it will not last forever. Buy when the markets have been oversold and be willing to sell some off when the market has become overbought. Utilities were oversold when I bought them and now from my thoughts they have become overbought ... So, I sold some of them off. Still, I am 5% overweight utilities (8%) as compared to the S&P 500 Index weighting (3%) ... and, within the Defensive Area I am also plus five percent over the Index. In addition, I am underweight the Sensitive Area with the exception being in communciation services where I am carrying a double weight; and, I am overweight the Cyclical Area through overweights in real estate and materials sectors.
Have a good weekend ... and, I wish all "Good Investing."
Skeeter
I view a small hold in energy related funds as a hedge against future serious dollar weakness. Keep about 7% so allocated in natural resource funds (energy normally being by far the largest component of these). Some years it has helped returns. Other years like this one it has hurt. Overall, it's been a "wash". Actually, many good diversified funds, like PRPFX and even OAKBX, maintain exposure to energy and that's what I'd recommend for most investors.
Natural resources are a key part of any portfolio - say 7-10% or so. However, with most people this is pretty much a fixed allocation as trading them is murder. I still have a tendency to nibble around the edges with momentum plays -with them or whatever. For example, I still have my pm play on albeit, I've reduced it significantly on the paper bullion side. And, as mentioned around here a few months back, still riding nat gas as very current mo play. Bought in at $2 or so and it's at $3.15 I believe. However, BOTH of these plays are with sh*ts and giggles money on the margin.
For the vast majority, I'd go with a nice natural resource fund and if you want to get cute, add a commodity fund . . . and call it good.
peace,
rono