Vanguard precious metal & mining fund

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Vanguard precious metal & mining fund

Postby jdrmlr » Fri May 03, 2013 5:38 pm

Is it a good time to buy VGPMX since it is the only Vanguard stock fund that is down year to date ? Would this fund be a hedge against future inflation after the fed is done with its' printing money ?
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Re: Vanguard precious metal & mining fund

Postby steve roy » Fri May 03, 2013 5:46 pm

Only the Mighty Carsoni knows. And the Mighty Carsoni is dead. (In other words, you can be a guesser or you can buy when you feel like buying. But don't overthink it with "Where is this going NEXT?" It's a fool's errand.)

I once had a chunk of VG Precious Metals, but dumped it some time ago because I was weaning myself from sector funds. All I've got now are VG REITS, some in the sector fund and some in Small Cap Value. (I'm at 15% REITS, which is my allocation number.)
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Re: Vanguard precious metal & mining fund

Postby Taylor Larimore » Fri May 03, 2013 6:00 pm

jdrmlr wrote:Is it a good time to buy VGPMX since it is the only Vanguard stock fund that is down year to date ? Would this fund be a hedge against future inflation after the fed is done with its' printing money ?

jdrmlr:

Bogleheads are not market timers.

In 1995 Vanguard's Gold Fund (now called Precious Metal and Mining Fund) was Vanguard's worst fund with a loss of -4.5%.

This is what happened to those who bought the worst fund:

In 1997, Vanguard's Gold Fund was again Vanguard's worst fund with a loss of -38.9%.

Bogleheads follow the teachings of our mentor, Jack Bogle, who wrote in Common Sense on Mutual Funds:

"Stay-the-course is the most important piece of wisdom I can give you."


Stay-the-course is also the last three words in the last chapter of The Bogleheads Guide to Investing.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
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Re: Vanguard precious metal & mining fund

Postby jdrmlr » Fri May 03, 2013 6:33 pm

I understand well the Bogelhead theory. However neither of you answered the main question which was is the fund a hedge against inflation ??????
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Re: Vanguard precious metal & mining fund

Postby Calm Man » Fri May 03, 2013 6:37 pm

I may be, it may not be. The taxes on the dividends are mostly not qualified.
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Re: Vanguard precious metal & mining fund

Postby lwfitzge » Fri May 03, 2013 6:38 pm

Metals, sector funds are not favored around here. Not too many gold bugs either. To answer you question, I use stocks/equities and TIPs on the fixed income side to hedge against inflation.
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Re: Vanguard precious metal & mining fund

Postby ourbrooks » Fri May 03, 2013 7:08 pm

The fund invests in mining companies which mine gold and other minerals, such as copper. When gold is up, companies which mine gold tend to go up as well; when gold is down or dropping, these companies tend to go down. People buy gold when they're worried about inflation and sell it when they're not.

The problem with holding this fund is that it's a lousy investment when inflation is not a concern and it can be a long, long time between bouts of inflation panic. TIPS are a much better answer to coping with inflation (as versus inflation fears). When inflation is low, TIPS still pay interest and you get more than your money back on maturity. The Vanguard TIPS fund is up about 4% over the past year; the precious metals and mining fund is down 32%.
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Re: Vanguard precious metal & mining fund

Postby DoWahDaddy » Fri May 03, 2013 7:17 pm

Calm Man wrote:I may be, it may not be.


This is true, and you should consider investing solely on that fact.
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Re: Vanguard precious metal & mining fund

Postby LadyGeek » Fri May 03, 2013 10:25 pm

This thread is now in the Investing - Help with Personal Investments forum (fund help).

Discussion of economic policy, e.g. printing money, is not permitted in this forum.
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Re: Vanguard precious metal & mining fund

Postby LadyGeek » Fri May 03, 2013 10:35 pm

Here's my perspective, which I've posted in several threads:

No one can predict the future. If you adjust your investments for the current economic environment (or what you think it will do), wait a few months and you'll be asking the same question again. That's known as "timing the market" - you'll be worse off than if you had just ignored whatever the market is doing now and stuck with your original investment plan.

"The market can remain irrational longer than you can remain solvent." --attributed to A. Gary Shilling, Forbes Magazine, 1993.

=================

You're getting good advice, Treasury Inflation Protected Security (TIPS) is a good alternative choice.
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Re: Vanguard precious metal & mining fund

Postby sometimesinvestor » Fri May 03, 2013 11:08 pm

To the extent that gold is a plausible investment to hedge against inflation, the etf GLD or even better IAU(lower expenses) is a safer bet though possibly less rewarding. Why safer :because you don't have to worry about labor problems at the companies the vanguard fund invests in or for that matter seizures by the countries where the mines are or poor stock selection by the manager.Gold is a bet on investor psychology and if inflation is increasing and more investors think that as a consequence gold will go up it will probably do so.
As you probably know, some think gold will work out well if we have a crises of some sort in this country but for if you have those sorts of concerns/issues you would probaly want physical gold like the gold coins the U.S.A ,Canada and South Africa issues

By the way if gold does very well the miners like those invested in by the fund will probably do as well or better though that han't been the case in recent years. For example over the last 5 years the fund is down by more than 60% and both GLD and IAU are up by more than 60%.I don't think my fund quote which I got from google finance includes dividends and cap gains. On the down side I believe the ETFs are taxed at a higher rate than the capital gains rate .
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Re: Vanguard precious metal & mining fund

Postby baw703916 » Fri May 03, 2013 11:21 pm

Bill Bernstein wrote an interesting post on this asset class several years ago.

The Longest Discipline

In short, putting 5-10% of your portfolio in this asset class and mechanically rebalancing has historically improved variance-adjusted returns. But only if you stay the course over decades.
Too good to be true, really—a long-term real rate of return of nearly five percent, within shouting distance of industrial stocks—and that’s before the five percent "rebalancing bonus." One doesn’t need to fire up an optimizer to realize that this asset class, with its 0.29 correlation with the S&P, belongs in every portfolio.

As you might suspect, there’s a price to be paid. You think that value and small-stock exposures were a tough row to hoe in the 90s? Have Japanese stocks given you fits for the past 15 years? You ain’t seen nothin’: since 1963, the precious metals equity (PME) series has lost more than 35% five different times and, on one occasion, nearly 70%. Between October 1980 and August 1998, it lost a total of 53.8%, or 4.2% annualized—a 7.7% annualized loss after inflation. For the more than 24 years between October 1980 and December 2004, the real return of PME was –0.3%.


Bernstein wrote this in 2005. So how has Vanguard Precious Metals done since then? Well, it has behaved true to form, so to speak. It tripled in value from 2005-2008, only to give up all of those gains (a 70% drop) in a matter of weeks during the 2008 crash. Then from 2009-2011, it recovered back to almost its 2008 high, only to have another 50% drop from early 2011 to the present. Take two Dramamine and rebalance in the morning.

If you decide you want to own this asset class, go ahead and own it--more or less forever. Don't even think about trying to market time it.
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