Bogleheads

[PlainJane]

Hi everyone,

I've been reading old threads about the 1970's. It seemed like the only things that worked back then were RE and commodities. Even bonds didn't help.

Yet, I don't see too many people here who have an allocation to commodities like they do to RE. Is there a reason for that? Is it becuase there is no good vehical for commodities? Any recommended reading on the subject?

Thanks!

-Jane

[magellan]

Jane,

If you search the forum for commodities or CCFs (collateralized commodity futures), you'll see that commodities are a hot topic with Bogleheads. There's a good thread here for a start.

There's a nearly universal opinion that if you're going to add commodity exposure to your portfolio, CCFs are a better bet rather than owning actual commodities. CCFs are a pretty complicated investment and that complexity is probably what deters many from adding them to their portfolio. Also, there are a couple of respected posters here who seem to understand the instruments pretty well, yet don't believe that they should be a part of most investors' asset allocation.

Personally, I'm on board with Larry Swedroe and others who believe CCFs can make for a better portfolio. I've owned PIMCO's Commodity Real Return fund for quite a while and have no complaints.

One important point is that you can get access to the institutional class shares of the PIMCO commodities fund (PCRIX) through Vanguard's brokerage service. This share class has much lower expenses than the investor class shares.

Jim

(edited to fix typos)

[pkcrafter]

Jane, there have been many conversations on commodities on the forum in the past few months, and many investors are using them. Try a search. One specific recommendation from Larry Swedroe is PIMCO commodity real return fund.

Paul
_________________

[RobertH]

The initial purchase minimum for PCRIX is $100k at Schwab, where my accounts are. If I recall other posts correctly it is $25k at TD-Waterhouse and Vanguard. Management fees for PCRIX shares are 0.5% lower than for the PCRDX share class.

Robert

[G12]

Yes, PCRIX minimum through Vanguard is $25k.

http://finance.yahoo.com/q/bc?s=PCRIX&t=5y

http://finance.yahoo.com/q/bc?....mp;c=PCRIX

I own both. No recommendation from me, but recently rebalanced back up to desired allocation in VGSIX/VNQ (ran out of room in the Roth, had to take VNQ in TIRA) after not adding new money the past few years.

Neither pro nor con on timing the holdings and Taylor makes very good points when he brings up the suggestion that investors are well served to establish significant positions in broad based market index funds before contemplating S&D allocations, if then.

[Quasimodo]

If you don't have $25,000 or more to put into a commodities fund, PIMCO has another one (PCRDX) with a $5,000 minimum but a higher expense ratio - 1.24% I believe. You can buy through Vanguard brokerage for no fee if you hold the shares for at least 6 months.

John
_________________
A beautiful thing is never perfect.

Egyptian proverb

[larryswedroe]

the two best and easy to read papers are in order
a) Ibbotson associates
b) Gorton and Rouwenhorst

Then if still want more read Erb and Harvey paper

[Kenster1]

Scott Burns now adds Commodities to his model portfolios...

http://assetbuilder.com/blogs/....-2008.aspx

He also favors the Powershares DB Commodity Index Tracking Fund ETF (DBC) which tracks the Deutsche Bank Liquid Commodity Index.

[Kenster1]

Interesting article...

http://www.financial-planning.....01022.html

[tc101]

I have decided to wait at least a year to move money into commodities from broader index funds like total stock market.

Commodities have just had a very good run. My thinking is that it can't hurt much to wait a year or until they go down and see if the enthusiasm for them is still there after they take a dip.

[cherijoh]

[larryswedroe]

tc101

I made that mistake myself tc. I bought in 2003 after a good run and was afraid of that so I did not buy the full amount I would have chosen --still waiting for that dip
You buy for insurance not returns so should not care about the recent returns

Bill Bernstein and I chat often and he has been waiting for years now for that dip so he might buy.

[diasurfer]

[tc101]

Larry,

What percent of your portfolio is in CCFs? If I remember correctly you are in your mid 80s? Would you recommend a similar percent for someone younger?

[CyberBob]

[larryswedroe]

TC, ouch
I am 56,
And I own a few percent--keeping with my suggested recommendation of from 5-10% of equity allocation.

[diasurfer]

[SmallHi]

Interesting that the Asset Builder portfolios (and returns) no longer reflect the prior enormous weighting to REITS (over 20%). Think that has anything to do with their 30%+ declines from Feb of last year values?

Now the portfolios seem to reflect a significant shift out of REITS and into commodities (done at the end of the year and not back in 2000), and unsuspecting future investors will never know the difference?

Sadly, AB clients will never capture the actual returns of these "model portfolios" with after the fact changes like this. Sorry, Scott. But in the real world, we don't get such "do overs"!

This wouldn't be such an issue if the whole push of AB is the performance of their model portfolios vs. poorly matched benchmarks (S&P 500 and so forth).

My advice to anyone reading: choose a real advisory firm like BAM, Portfolio Solutions, Equius Partners, or Altruist! If the fact that this firm won't go through the effort of using tax-managed funds and muni bonds in taxable accounts wasn't evidence enough, take this message as the nail in the coffin.

Sorry for the rant.

sh

PS -- equally scary is their inability to comprehend basic concepts of Modern Portfolio Theory...based on this quote from one of their principals:

In our optimized portfolio construction our "glue" -- the stuff that influences how we put portfolios together -- is the level of risk in any given asset class

yeah, forget about how that risk translates on a portfolio level, focus on each asset class, one by one, and all by themselves!

[larryswedroe]

I actually just sent Sauter an email asking him if Vanguard would develop a CCF fund backed by TIPS. Would love to see Vanguard type pricing

[diasurfer]

[Kenster1]

[diasurfer]

I thought the poster was asking if Larry's portfolio was 85% commodities. I can't decide which is funnier!

[tc101]

[CyberBob]

[clay]

[Midpack]

I have commodities in my portfolio. Here's the most convicing read on the topic I've seen lately. http://www.indexuniverse.com/c....;Itemid=11
_________________
You only live once...