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Investing in Commodities

mrc70
edited April 2013 in Fund Discussions
Hi,

I invested in PCRIX and PSPFX(relatively best NTF option available at TDA) at the beginning of this year. This is my first foray into commodities. I just started with a small %age (2.5 tigether now) and would like to increase it a mininmum of 5% and max of 10%.

They went down by 5-10% since I bought. I would like to know if this is the right time increase the exposure or wait for a better time.

Thanks for your help.

Comments

  • STB65
    Who knows?
    Barron's this week says maybe gold miners have fallen low enough to be worth a look. China seems to be slowing; India reportedly (Barron's again) is worse, and they buy the commodities. If I were doubling or quadrupling my investment, I'd go very slowly. There's a bottom there somewhere. After watching ARCNX bleed out 20% in 7 months ("risk adjusted" seems a relative term), I gave up on half.

    Smarter people will weigh in later.

    Buying on the way down is less rewarding than waiting for the curve to start up. You could watch the weeklies on the commodity funds and buy after a couple of up weeks (or more) since it is a long term holding for you, I presume. You could see what HACMX and ARCNX do to give you some clues.
  • Sven
    If global economy continues to slow, the demand for commodity will decline accordingly. This is one asset class I rather not bet on. If the economy worsen into even a mild recession, commodity seldom do well.
  • Hiyield007Hiyield007
    edited April 2013
    Per Morningstar Commodities Broad Basket Funds percentage annualized returns

    YTD - 6.85
    1 YR - 8.17
    3 YR - 0.44
    5 YR - 11.44
    10 YR +2.98

    The numbers speak for themselves.
  • MikeMMikeM
    It's my 2 cents that commodity and natural resource funds generally do well during growth and expansion cycles. Industries have to be expanding, countries have to be growing and consumers have to be spending. I don't see that on the near term horizon.

    When I first started participating on Fund Alarm back around 2006-2007, funds like PCRIX, PSPFX, MOO and precious metal funds were the talk of the board along with anything China. But at that time emerging markets, especially China, were growing at an extraordinary rate. In the U.S. everyone felt rich with a rising stock market and easy access to borrowing money. That's changed. Have commodities and NR's reached bottom? That anyone's guess. I think they can go trudging along for a while.

    I've been wrong so many times I hate to give others advice where to invest, but these funds are too volatile for me. That said, I do hold a very small amount of PRNEX. I've held it at different percentages for many years.It is a bit tamer than PSPFX possibly because it holds a higher percentage in energy. At least it did in the past.

    Good luck to you on your decision.
  • Gandalf
    I believe that Scott Burns (Asset Builder) recently dropped commodities from their model portfolios. Not sure why, but suspect they were not seeing positive upsides.
  • Pangolin
    Suggested reading:

    InvestmentNews: Investors in commodity ETFs getting 'eaten alive':

    http://www.investmentnews.com/article/20100722/FREE/100729971#
  • AndyJ
    edited April 2013
    Reply to @Pangolin: Excellent piece: all the reasons for a retail investor to avoid the commodity markets, "rolled" into one article.
  • AndyJ
    edited April 2013
    Reply to @Gandalf: See Pangolin's link below.

    Also, TR Price's "real assets" fund is a stock fund, not a commodity fund; they apparently don't play in those assets/markets either.
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