So don't worry if you haven't yet backed a truckload of commodities into your portfolio.
WSJ: The Intelligent Investor: Why Your Stocks Are Acting Like Commodities
Not a lot of gold--even the most bearish portfolio managers recommend putting only 10% of your money into commodities--but enough to give assurance that you won't be destitute if the U.S. economy falls over dead.
Alex Shahidi, an investment counselor at Bank of America Merrill Lynch in Los Angeles, says he allocates 20% of a typical long-term portfolio to commodities.
That's why some 30% of the portfolio is in the energy, industrial commodities, manufacturing and transportation areas, outfits like Dow Chemical, Phillips Petroleum, Union Pacific, FedEx, Rio Tinto, Alcoa, Deere, Caterpillar and International Paper.
Thus, the studies concluded that a mix of stocks and commodities offered a terrific risk-adjusted portfolio.
That helping of commodities would have added 1% to the momentum portfolio, the least among the five.
For a 50-year old with average risk tolerance, it recommended a portfolio of about 40% bonds, 47% stocks and the rest in commodities and real estate fairly standard advice for such an investor.
This portfolio can be used to embrace all manner of investments such as Bonds, Commodities, Equity, Foreign Exchange, Loans and Options plus less transparent assets such as Derivatives, Exchange Traded Funds, Film Box Office Sales Human Resources, Real Estate, Structured Products, Trade Marks, Patent and Marketing Rights.
And real estate commodities and stock should be a part of everybody's portfolio.
All told, the Schultz portfolio revision would have 11% of the Muchmores' financial assets in gold, commodities or energy plays.
Then there are go-anywhere mutual funds aimed at providing portfolio diversification by bobbing and weaving across a range of markets stocks, bonds, commodities and even currencies.
WSJ: As Many Stocks and Bonds Get Pricey, It's Time to Play Defense
Overall, four of the five highest multi-asset-class returns had commodities in the portfolio since commodities had the strongest diversification potential when combined with other asset classes.
The more investors decide that they need some commodities exposure (as a portfolio diversifying tactic), the higher the number of futures contracts that must be purchased.
One way to protect yourself from that is to further diversify a part of your portfolio into foreign stocks and bonds and perhaps alternative investments like real estate and commodities that tend to do well in inflation.
That means that before buying any new asset to add to your portfolio, you should see where it fits in with your mix of domestic bonds, stocks, gold, commodities, emerging markets, real estate funds, and international funds.
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