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Commodities Investing
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Should I invest in commodities like oil and gold?
Maybe — but only with a small portion of your portfolio.
There are three main arguments for investing in commodities. The first is diversification: commodity prices often move in different directions than stocks and bonds, so they can help smooth out a portfolio’s returns. Reason two is to protect against a spike in inflation, because costs of raw materials tend to rise at least as fast as overall prices when inflation heats up. The final rationale is to guard against the possibility that the financial system will fall apart, in which case hard assets probably would hold their value better than financial assets.
Commodity prices can be outrageously volatile, however. Take oil prices, which dropped about 75 percent during the last six months of 2008. What’s more, commodity prices can stagnate for decades: Gold hit $875 an ounce in 1980, and didn’t reach that level again for nearly three decades. After adjusting for inflation, gold remains at less than half its 1980 peak, despite recent gains.
So what to do? You may want to keep 5 percent or so of your portfolio in commodities — but don’t bet the farm on them.
Editor's Pick
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Add Commodities to Your Portfolio
Here's how you should look at commodities and why the academic evidence favors adding an allocation.
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5 Rules for Investing in Commodities
At the end of the day you want to make money. Investing in commodities could boost your returns.
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The Real Reason Gold is Soaring
Here's a hint: It's not about inflation. To find the answer, focus on fear and greed.
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Why Oil Prices Swing so Wildly
This year, there has been abundant supply and slowing demand, but prices have doubled. Economics 101 says that shouldn't happen. But it has.
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Scared of commodities? 4 tips for reducing risk
NEW YORK (AP) — For the hordes of investors who piled into gold and silver in recent months, the last few weeks have been an eye-opener.Gold is down 5 percent this month after jumping 21 percent in the last year. Silver is down 30 percent after rising 78 percent. What they don't tell you in...
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Stocks reverse early losses as commodities rise
NEW YORK (AP) — A bounce back in materials and financial companies erased early losses in the stock market Monday.Commodities like corn and cotton rose than 3 percent in midday trading, in part because of a slide in the dollar that sent the prices of raw materials higher. Most commodities...
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Grantham: Sell in May and Don't Come Back
Jeremy Grantham, the GMO strategist, had been forecasting further gains in stocks, despite what he sees as extreme overvaluation, until October. In his latest letter to investors, he brings the timetable for a decline forward – to right about now. by Conrad de Aenlle
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Stocks fall as European financial crisis expands
NEW YORK (AP) — Since when does the stock market take its cues from the market for silver, oil and pork bellies? When it's really the dollar that's driving the action.The stock market rally, which began in August, relied on stronger earnings, rising commodity prices and a weak dollar, said...
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Stocks edge higher as commodity slide eases
NEW YORK (AP) — A small recovery in commodities and a rally in companies that make consumer staples like toilet paper and pasta helped the financial markets reverse a decline Thursday to end the day with modest gains.Consumer staples and health care led the market due in part to concerns...
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Slumping oil, commodity prices halt stock rally
NEW YORK (AP) — Tumbling demand for commodities and a drop in the euro led to a broad stock sell-off Wednesday that pulled the Dow Jones industrial average down 130 points.Demand for gasoline in the U.S. fell by the largest amount in seven weeks, the Energy Information Administration said, a...
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Energy, metals stocks rise with commodity prices
NEW YORK (AP) — Commodity prices recovered some of last week's losses Monday, helping to lift the stocks of energy and materials companies. The broader market also rose despite new worries about Greece's debt problems.Oil prices once again moved above $100 a barrel and pushed energy stocks...
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Commodity rally sends stock indexes higher
NEW YORK (AP) — Widespread gains in commodity prices lifted energy and materials companies as part of a broad stock market rally Wednesday after three days of declines. Stocks built on morning gains after the Federal Reserve released minutes that showed that officials agreed that the economy...
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Summary Box: Commodities rally lifts stocks
FED MINUTES: Stock indexes built on morning gains after the Federal Reserve released minutes that showed that officials agreed that the economy is improving, which could lead to higher demand for raw materials like steel and fertilizer.OIL JUMPS: Oil gained nearly 4 percent to move back above...
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Hedge Funds Keep Great Returns for Themselves
A new study shows that a subset of hedge funds appears to provide outstanding returns before fees. However, biases in the data and the fees charged by hedge funds reduce the outperformance to nearly zero. Basically, you're handing over your money to make them rich. by Larry Swedroe
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