Funds in mining, gold and other commodities

El_Torro

I've just moved an old company pension (the only pension I currently have) into an H&L SIPP. It's all sitting in cash at the moment and I'm just deciding where to invest it.

Shares seem to be very high value at the moment and I don't see that lasting for much longer. I'm half tempted to hold off investing until it dips but I appreciate that it could take months and in the meantime my pension would be sitting in cash earning practically no interest.

Based on some research I did while waiting for my pension to transfer I decided to invest in the following:

Legal & General US Index Class C Acc - 20.68%
Legal & General UK Index Class C Acc - 15.47%
BlackRock Continental Euro Equity Tracker Class H Acc - 14.97%
BlackRock Pacific ex Japan Equity Tracker Class H Acc - 9.98%
BlackRock Japan Equity Tracker Class H Acc - 6.24%
Neptune Africa Fund Class C Accumulation - 6.24%
Aberdeen Latin American Equity Class I Acc - 6.24%
Legal & General All Stocks Index Linked Gilt Index - 9.83%
Legal & General Global Inflation Lnk Bond Index Class C Acc - 9.87%
Cash to pay fees - 0.48%

One thing I hadn't thought of which I might consider now is investing in commodities. So either a gold fund, or mining or a more general commodities fund. Looking at past performance, values have dropped a fair bit over the last couple of years but if the world economy goes south again commodity prices will increase (as they tend to do during recessions) and the mining companies will reap the benefits.

Since the general tracker funds I'm looking at will mainly focus on the service sector I imagine this will be quite a good way of balancing my portfolio. As the general stock market drops my mining funds will rise, at least in theory.

I appreciate that mining companies have very volatile share prices so I wouldn't invest too heavily in them. Maybe rebalance my portfoilo to allow for 5% in a mining fund. e.g. this one: http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/b/blackrock-global-world-mining-d4rf-gbp-income
Or maybe this more general commodities fund would be better: http://www.hl.co.uk/funds/fund-discounts,-prices--and--factsheets/search-results/m/marlborough-etf-commodity-fund-class-p-accumulation

Your thoughts?

Thrugelmir

Days of the miners driving the FTSE have passed. Miners have there own problems to contend with.

planteria

i like the sector though, and there are some decent dividends at current prices.
i have some of my ISA in S&W Gold & General shares, and some AngloAmerican shares.

sabretoothtigger

FTSE is more commodity then most indexes. I think you could just stick to it simply.
If miners do well they will become a larger percent, they could take off certainly.
UK is going to be importing energy, nuclear is coming offline so invest or not this is part of your financial situation oncoming

Specialisation beyond that is a bit iffy. I have a gold fund of miners and its long time brewing thats for sure. The biggest companies arent going bust but its not doing great as oil is one of their biggest costs
Its very unpopular

I used to own AAL, big on diamonds still arent they and platinum

Dont buy that ETF fund, its stacking charges. Seems really bad mix to me.
Simple thing to do is track the CRB index (the top holding), Im looking for this myself now.
CRBU I used to own was about the same cost as a ftse fund, it does rely on futures contracts though; obviously the fund doesnt store warehouses of wheat.
It was profitable 2009 onwards and I think it can be now also but its more a decade theme then profit by xmas so low charges is good

planteria

yes, i like the diamonds and platinum element. murmurs of Glencore trying to merge with Anglo too.
agree re. some funds....the big FTSE100 miners are diversified as it is.

Jegersmart

Hi El Torro

I am a bit confused because you start by saying that most equities look very pricey (I agree) and then after research decide to put 80% in equities....

I understand the need to feel like you need to earn interest every day of the year but if the main equities drop by 20% over the summer into autumn then that's an awful lot of "interest" to make up.....

One thing you could consider is to divide your pension pot into a number of chunks and then invest them over time? Say 8 pots to be invested over 8 months, that at least should smooth out some volatility?

The other thing is that your pension is a very long term investment (unless you are close to retirement ofc) so a few months of not being in the equities market will not matter and may indeed help you when things look stretched. Patience is key so that you get a good base to invest longer term from.

Personally I like the gold miners sector and having been buying them for several months so far, they are out of favour and are quite near 2009 lows. This doesnt mean they cant fall further but sooner or later interest rates will rise, gold will be backin favour and this sector will have its day. That may take some time of course, but this is a long term thang...:)

Whatever you decide I wish you the best of luck!

J

El_Torro

Jegersmart wrote: »

Hi El Torro

I am a bit confused because you start by saying that most equities look very pricey (I agree) and then after research decide to put 80% in equities....

I understand the need to feel like you need to earn interest every day of the year but if the main equities drop by 20% over the summer into autumn then that's an awful lot of "interest" to make up.....

I'm glad you're confused, cos I am too (or at least conflicted) about what to do next

I agree, if I invest now and a couple of months later equities drop by 20% I would have been better off waiting. But what if they don't drop in the next few months? What if it's early next year, or middle of next year, or even later? I've heard people say that when investing in the long term (I'm 34, so retirement is quite a way off) it doesn't really matter too much when you invest as long term growth will iron out the peaks and troughs.

Jegersmart wrote: »

One thing you could consider is to divide your pension pot into a number of chunks and then invest them over time? Say 8 pots to be invested over 8 months, that at least should smooth out some volatility?

Sounds like a good idea, and not something I had really considered. This might be a good compromise considering that I think equities will drop sooner rather than later.

Jegersmart wrote: »

Personally I like the gold miners sector and having been buying them for several months so far, they are out of favour and are quite near 2009 lows. This doesnt mean they cant fall further but sooner or later interest rates will rise, gold will be backin favour and this sector will have its day. That may take some time of course, but this is a long term thang...:)

That was part of my reasoning when considering commodities. Funds have performed poorly over the last couple of years so in theory now is a good time to buy to ride the wave back up. I was thinking more general mining sector rather than gold specifically. Perhaps I'll start drip feeding in to the more traditional funds now and consider gold / etc... once I'm more sure about it.

EDIT: What if I buy 100% bonds now and reallocate to 80/20 when (if?) the market drops?

princeofpounds

if the world economy goes south again commodity prices will increase (as they tend to do during recessions) and the mining companies will reap the benefits.

eh?!

you sure you've got this right?

jabba42

If the market tanks and gold goes up I think Gold miners will do OK. Cannot see industry based metals doing well though when we are in a deflationary scenario.