In my case I had no idea who Swedrow was. But I'm not going to fault people for pursuing additional diversification. I got in early/mid 2000's as commodities were making a run. Then Grantham came to the conclusion that commodity surge was not a bubble. Then of course 2008 happened and commodities never recovered, but the reasons varied by commodity.HomerJ wrote: ↑Sun Oct 25, 2020 5:07 pmYes, many people bought into that because Swedroe told them so. And it cost real people real money.JBTX wrote: ↑Sun Oct 25, 2020 3:02 pmFor years I bought into the commodities diversification theory. But then over time as I learned about their long term middling return, contango, the fact that the derivative based ETF can't exactly track and index, usually worse, and high expense ratios I finally bailed on that. Just redirected to gold and silver which are hard assets and easier to track.nedsaid wrote: ↑Sun Oct 25, 2020 10:17 amYou started out expressing a concern that I have had about hedge funds and those trying to copy the strategies of the relative few that have been successful. That is you really have to know what you are doing, you are up against the world's smartest people with resources and contacts for research that few can access. They also have the best IT in the world. Hard to fathom that retail investors can compete with that, perhaps Vanguard, Blackrock, and Fidelity could compete in the hedge fund space but they are for the most part playing a different game: sort of an investing vs. a trading strategies type of mindset. Whenever you employ shorting and leverage, you take on all kinds of additional risks that aren't always well understood.JBTX wrote: ↑Sun Oct 25, 2020 12:51 am
Dahlio is a guy who has convictions, but can make fairly significant moves in a short period of time that would impossible for individual investors to replicate.
I am also about 60% stocks and just a few years behind you. The other 40% is a fairly unruly composition of approximately:
5% cash (includes emergency / liquidity fund)
12% conventional bonds
None of that includes our home.
As much as I loved Larry Swedroe's contributions to this forum, I wondered if AQR and Stone Ridge were just in over their heads trying to compete with the likes of Dalio or even Buffett. Larry is well known, really smart, and I really admire him for eating his own cooking. He certainly has much better reach than I do and access to better resources and brainpower than I. I just wonder if Ray Dalio, Warren Buffett, or James Simons would return Larry's phone call. The best I can do is get calls returned from three investment advisors that I know and Larry will answer the rare occasions that I e-mail him. Larry is really good at what he does but he can't be good at everything in the investment world and I wonder if the AQR and Stone Ridge Alternatives were just a bridge too far. The markets are more efficient and more brutal than you think, if one gets too far beyond your expertise the markets can hand your head back to you. There is a point where you are outmanned and outgunned.
Perhaps Larry's recommendations for the Alternatives will be vindicated. 2020 was an odd year, sort of like Egypt facing the 10 plagues. We are at about seven now, then I read somewhere that Neil deGrasse Tyson said that an asteroid could hit the earth right around election time. Lions and Tigers and Bears, oh my. I wish Larry well on his recommendations, I was excited about them and sincerely wanted them to work. So far Variance Risk Premium, AQR Style Premia Alternative, and Reinsurance have disappointed. Only Alternative Lending has done fairly well but it has done about the same as the bond index. Perhaps 2021 will vindicate Larry, I sincerely hope so.
I agree on not knowing if there are some out there that can beat the market, but even if they can it is difficult to replicate in scale and expenses usually negate any theoretical advantage.
And many people bought into his new Alt fund theory. And it has cost real people real money.
But it could still turn around. Maybe.
They were never a big piece of my portfolio so I'm not to worried about it. And of course, diversifiers can and do go down. Stocks and bonds have been on decades long tear, so in that sense commodities diversification effect is "working".