Commodities v Equities split

wombat42_2

Commodity prices have been booming for the last few years and all the signs are that they will boom for at least another 10 because of massive increased demand for gold, steel, oil, food etc from the developing countries and the fact the world population is rocketing - ref "the commodities supercycle".

However commodities have traditionally have been thought to be more risky than shares and you should put no more than 10% of your portfolio in them. But i think the signs are that it is just as liikely that commodities will do better than shares over the next 10 years. I now have a portfiolio split of 50% commodties and 50% equities. Typically if one goes up, the other goes down - for example at present shares are tanking but commodites are booming.

mr_fishbulb

What about equities in companies who do well on rising commodties?

A thing to take into account is that commodities don't pay dividends, which traditionally make up a chunk of investment returns.

meester

50% commodities !!!!!

How would that have performed, 1981-2001?

wombat42_2

mr_fishbulb wrote: »

What about equities in companies who do well on rising commodties?

A thing to take into account is that commodities don't pay dividends, which traditionally make up a chunk of investment returns.

Commodity producers like miners you mean. I think it best to avoid commodity producers unless you only put a small percentage of your portfolio in them as they usually magnify commodity price movements and are therefore more risky than pure comodities. Also there is a chance that a commodity price will go up but not the share price of a producer as overheads and cost of production may go up.

wombat42_2

meester wrote: »

50% commodities !!!!!

How would that have performed, 1981-2001?

Many people say we are in a completely different ball game these days.

mr_fishbulb

wombat42 wrote: »

Many people say we are in a completely different ball game these days.

Many people said that about house prices a couple of years ago

meester

wombat42 wrote: »

Many people say we are in a completely different ball game these days.

You have no idea though. It's quite arrogant to assume that you know better than the market, not to mention expensive.

wombat42_2

mr_fishbulb wrote: »

Many people said that about house prices a couple of years ago

I am not going to bore you with the details but there is plenty of empirical evidence that commodities are set to boom for the next 10 years due to massively increased demand. How can you have any confidence that equities will do any better ?

wombat42_2

meester wrote: »

You have no idea though. It's quite arrogant to assume that you know better than the market, not to mention expensive.

The market trend is there right now, commodities booming, equities tanking.

mr_fishbulb

wombat42 wrote: »

I am not going to bore you with the details but there is plenty of empirical evidence that commodities are set to boom for the next 10 years due to massively increased demand. How can you have any confidence that equities will do any better ?

I don't have any confidence that anything will do well at the moment

But I'm with you on commodities having more potential. Everybody needs food, energy, etc whatever the financial situation in other markets.

purch

When you say 50% commodties (sic) what do you mean ??

Have you directly invested via Futures ?? ETC's ??

50% directly invested is a scarey proposition if you don't really understand what you are doing. The Volatility of the Commodity Futures market is 'eye watering' and these markets are driven by a myriad of factors, not least technicals which can make the markets move in ways that defy the fundamentals frequently. Take Gold...the fundamentals mean you can expect the price to keep rising, but technically it's quite possible the market is building a huge rising head n shoulders formation ( well I can see it anyway ) which will require a pull-back into the $700's to finish the second shoulder.....then a major bull run to $ 1500 and beyond is quite possible.

Are you able to sit tight through such a move ??

for example at present shares are tanking but commodites are booming.

...........if only it was as simple as that !!!