New article very bullish on commodities

wombat42_2

http://www.thisismoney.co.uk/investing/article.html?in_article_id=430652&in_page_id=166

jon3001

Bit more on portfolio allocations:

Investors need to note however that commodities are going to be volatile investments so should be prepared to ride the downturns as well as any booms. Experts recommend that your investment portfolio should hold no more than 5% in this sector and for those willing and able to take a substantial risk they could go as far as 10% to 15%.

Not sure why 10% would be 'substantial risk'. If the sector had a 40% decline then that's 'only' 4% of your overall portfolio. Hopefully this would be offset by gains from other asset classes.

I've started around sept '07 putting most of my new money into this sector. My target allocations would be on the high side - but it's not too late to trim back if I have a change of heart.

10% Diversified commodity index [FAIG]
5% Precious metals (currently silver [PHAG] buy may diversify into gold [PHAU] once the Gold:Silver ratio tightens)
5% JPM Natural resources.

My reasons are:
* Take advantage of what will hopefully be a strong bull market by having a strong allocation
* Lack of other exposure to 'hard assets' e.g. property - although this sector may become attractively priced later this year.
* Build an all-weather portfolio that isn't reliant on one asset class (e.g. equities)

wombat42_2

jon3001 wrote: »

Bit more on portfolio allocations:

Investors need to note however that commodities are going to be volatile investments so should be prepared to ride the downturns as well as any booms. Experts recommend that your investment portfolio should hold no more than 5% in this sector and for those willing and able to take a substantial risk they could go as far as 10% to 15%.

Not sure why 10% would be 'substantial risk'. If the sector had a 40% decline then that's 'only' 4% of your overall portfolio. Hopefully this would be offset by gains from other asset classes.

I've started around sept '07 putting most of my new money into this sector. My target allocations would be on the high side - but it's not too late to trim back if I have a change of heart.

10% Diversified commodity index [FAIG]
5% Precious metals (currently silver [PHAG] buy may diversify into gold [PHAU] once the Gold:Silver ratio tightens)
5% JPM Natural resources.

My reasons are:
* Take advantage of what will hopefully be a strong bull market by having a strong allocation
* Lack of other exposure to 'hard assets' e.g. property - although this sector may become attractively priced later this year.
* Build an all-weather portfolio that isn't reliant on one asset class (e.g. equities)

Are you tempted by a little bit by Eclectia Agriculture ?

Whats your other 80% invested in ?

I find the risk warnings difficult to understand as there is a fair chance that equities will tank in the next decade but commodities will continue to soar.

jon3001

wombat42 wrote: »

Are you tempted by a little bit by Eclectia Agriculture ?

TBH I've not really looked at it closely. I'd still have some agriculture exposure anyway though FAIG and apparently JPM NR has a small exposure to softs such as palm oil which can be used as a biofuel.

wombat42 wrote: »

Whats your other 80% invested in ?

It's a bit of a hodgepodge ATM but I'm doing some more research (in terms of funds and allocations) to sort it out. According to books like 'Intelligent Asset Allocator' you should treat all your long-term holdings as one big portfolio so for me this includes emergency cash, pension funds and ISAs.

Of the 80%, there's about 20% cash/bonds and 60% is a mish-mash of pension funds (mainly equities including domestic, international and small company) and equity index-funds in ISAs.

mr_fishbulb

wombat42 wrote: »

Are you tempted by a little bit by Eclectia Agriculture ?

Eclectia Agriculture looks like it invests in shares, Schroder Agriculture looks like it invests in commododities:

http://www.morningstar.co.uk/UK/snapshot/snapshot.aspx?id=F000000GRH
http://www.morningstar.co.uk/UK/snapshot/snapshot.aspx?id=F000000DW8

Both doing well.

I'm thinking of going into Eclectia Agriculture as I think the food producers will start to see high profits from the higher prices, whereas the commodities have already had a big jump, not sure if they will jump again that quickly.