JPMorgan Natural Resources -48% down but still hanging on

MARTYM8`

BrockStoker wrote: »

I'd be very surprised if there wasn't more pain to come. I think much of the blame for the trend over the last few days is down to Greece though.

If you invest in this fund you presumably take the view that over the long term as the population of the world grows by a billion every 10-15 years and the planet’s resources do not then commodities will become more scarce/costly – so in the longer term this sector will be positive.

Clearly its not for the feint hearted – but do you invest in funds at an all time low or funds at an all time high (like most other funds)?

I certainly think its worth a punt long term – as a small part of your portfolio. People will always need commodities - cos we all need to eat, have electricity and travel around.

BrockStoker

MARTYM8` wrote: »

If you invest in this fund you presumably take the view that over the long term as the population of the world grows by a billion every 10-15 years and the planet’s resources do not then commodities will become more scarce/costly – so in the longer term this sector will be positive.

Clearly its not for the feint hearted – but do you invest in funds at an all time low or funds at an all time high (like most other funds)?

I certainly think its worth a punt long term – as a small part of your portfolio. People will always need commodities - cos we all need to eat, have electricity and travel around.

I do try and invest when a fund is low, although I have made the mistake of investing when a fund is high in the past (and learned my lesson!).

I realise people will always need commodities and investing should be for the long term, but I would not touch them with a barge pole right now. With China slowing down, and the potential for more oil companies to go bust in coming months I feel it's way too risky at the moment. There is also always the danger that the fund might close in which case a significant loss could be crystalised.

This is why I wouldn't even consider it till there are signs of a recovery, and if it was me in it right now, I'd give serious consideration to jumping ship even though the general rule is that you shouldn't, but I've never come across a rule that does not have an exception.

blinko

In theory this fund should eventually increase in value purely due to natural resources being a finite supply. BUT it may be a long time

masonic

BrockStoker wrote: »

This is why I wouldn't even consider it till there are signs of a recovery, and if it was me in it right now, I'd give serious consideration to jumping ship even though the general rule is that you shouldn't, but I've never come across a rule that does not have an exception.

The reason that your views are differing from others in this thread is because you taking the view of a trader rather than an investor. Traders are focused on identifying holdings that will generate short term gains and avoiding those in which they would sustain short term losses. They choose their investments based on things like momentum and valuation, or even the frequency of certain keywords appearing in company reports in the case of one well known trader. If you are a trader and you buy an investment that falls 10-15% you should probably sell it to cut your losses, perhaps looking for a lower entry point if you believe there is potential for it to rebound in the short term.

By contrast, an investor would have a holding period much longer, perhaps 20-30 years or more. What happens in the short term is unimportant. In fact, as many investors drip-feed into their holdings, it is better that they do not increase significantly in price in the short term, provided that their long term prospects remain good. An investor might allocate 3 or 4 or 5% of their portfolio to a fund like this and if it falls in value they would rebalance by buying more. I will be adding to my resources fund when I next come to rebalance unless there is a strong recovery between now and then. Of course, investors can deem this sector too risky, in which case they wouldn't hold it in the bad times, but neither would they buy in during the good times.

In general, investors tend to do better than traders. There are a few examples of traders who have been quite successful, but most people reading this will be more successful as long-term investors.

jamesd

tejero23f wrote: »

I notice JPM NR have dropped to almost their lowest ever price this morning, can it go any lower

It's 57% higher than it's 2008 low and if it was to drop that after buying today you'd have a 36% capital loss. I see it's at 465.6 at the moment. Lets look at some of the prices of the accumulation version of this fund:

20-12-2013: 566.40
21-11-2008: 297.10
4-1-2011: 1194.00

The 2008 low was 52% of 20-12-2013 price and 24.9% of the 4-1-2011 price.

You may be getting fooled by the five year charts that are typically provided to consumers. Those are very nasty at times like this when it's been more than five years since the last big drop. They can easily present a one way gain picture showing little more than the recovery from the low. Until the next drop happens.

tejero23f

now at new 5 year low- must be a buying opportunity!

fun4everyone

tejero23f wrote: »

now at new 5 year low- must be a buying opportunity!

From what I can see the current manager has been in the job 3 years and this fund has significantly underperformed its benchmark for 3 years. Could just be bad luck but isn't this more likely a poorly managed active fund with high fees? Surely there are better managers out there to place your money with if you want to invest in this area following recent drops.

bowlhead99

fun4everyone wrote: »

From what I can see the current manager has been in the job 3 years and this fund has significantly underperformed its benchmark for 3 years. Could just be bad luck but isn't this more likely a poorly managed active fund with high fees? Surely there are better managers out there to place your money with if you want to invest in this area following recent drops.

What do you consider to be its 'benchmark', and would you generally think that the fund's investors aim for the fund to exceed its benchmark during a resources crash, or indeed in any 3 year period, rather than the long term?

fun4everyone

bowlhead99 wrote: »

What do you consider to be its 'benchmark'

Morningstar compare it against "S&P Global Natural Resources TR USD". I will be honest and say I don't know how good a benchmark that is to use, but it sounds decent enough to me and I trust Morningstar to pick a reasonable benchmark.

and would you generally think that the fund's investors aim for the fund to exceed its benchmark during a resources crash, or indeed in any 3 year period, rather than the long term?

I agree 3 years is not a very long timespan and judging on that is being a bit harsh. However it is a significantly bad poor performance looking at the graph and the fees are quite high. It is right to ask questions in that area imo.


Also from what I understand active managers tend to say their skills come in to play during bear markets/draw downs. That's when they show what you pay the fees for. Passive funds tend to do better in raging bull markets. At least that is the general gist of what I have read. So yes, I would generally expect a good active manager to show his skills in a big crash.


At least to me, if you wanted to invest in this area this seems a very poor choice of fund to do it with. Perhaps I am wrong but just me.

masonic

fun4everyone wrote: »

Also from what I understand active managers tend to say their skills come in to play during bear markets/draw downs. That's when they show what you pay the fees for. Passive funds tend to do better in raging bull markets. At least that is the general gist of what I have read. So yes, I would generally expect a good active manager to show his skills in a big crash.

I think that's a gross overgeneralisation. There are some active managers who take a cautious approach as you describe, but many do not. A fund like this is considerably more volatile than its index and should be expected to outperform it in the good times, but underperform it in the bad times. If preservation of capital is important to you, then this is not a good fund (or sector) for you to be invested in. However, that doesn't necessarily make it a bad choice for anyone who has a different attitude to risk.