Submitted by Anonymous on
Analysts from commodities investment firms say that the recent run in oil prices will be short-lived, with some evidence of a dip during today's trading.
Would you suggest opting for an alternative?
Natural gas--though there's a huge supply that's currently keeping prices low?
Soy--prices have gone up enormously over the past month, but may be overpriced, as well?
Precious metals--even though they may not do so well once the market recovers?
I'm a firm believer in Peak Oil, but I have a sense that Americans won't feel the effects of it until another 10-20 years from now.
Thanks,
William
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tom replied on Permalink
The Popping of the Oil Bubble
Great question.
Unfortunately, at this time I have no information that would enable me to provide meaningful comments on the relative merits of soy versus precious metals versus natural gas.
What good non readily available info do you think you might have access to in order to make an investment decision that is more informed than the market at the moment? Fine if playing around with hypothetical portfolio but not real $$.
Why not simply think of broader diversification rather than more concentrated bets within various commodity sectors?
In other words, what about a broadly diversified energy fund that includes equipment makers, oil, natural gas, etc? Maybe take a look at something like IXC?
Same could be said for commodities. Maybe take a look at something like GSG rather than trying to figure out which sector will outperform?
Commodity/energy supply constraints seems to be a pretty sound investment thesis at the moment. Technology may change that, but emerging consumer/middle classes in developing markets coupled with potentially huge inflationary pressures building in developed markets results in supply pressures.
Also may be interesting to take a look at water??
Anonymous replied on Permalink
Thanks for the great
Thanks for the great responses, Tom.
So generally what you're saying, if I'm correct, is that I should diversify; but what if a person wants to dip his/her toes into more riskier territories, say, individual stocks? Is it worth it? Based on your expertise, would you consider ETFs to overall outperform individual stocks in the long run?
And with regard to water, would you happen to be referring to PHO? (Awesome advice, by the way, about water, considering this baby is the "next oil"--overpopulation and climate change and desertification will definitely cause prices to skyrocket in the future).
William replied on Permalink
Thanks for the great
Thanks for the great responses, Tom.
So generally what you're saying, if I'm correct, is that I should diversify; but what if a person wants to dip his/her toes into more riskier territories, say, individual stocks? Is it worth it? Based on your expertise, would you consider ETFs to overall outperform individual stocks in the long run?
And with regard to water, would you happen to be referring to PHO? (Awesome advice, by the way, about water, considering this baby is the "next oil"--overpopulation and climate change and desertification will definitely cause prices to skyrocket in the future).
tom replied on Permalink
Diversify
Diversification is always important.
Attention to cost is also super important.
I don't recommend individual stocks for retail investors unless it is somehow a sideline or purely for entertainment. If this is the case, there are plenty of places where you can establish a hypothetical portfolio (e.g. Marketocracy used to do something like this) and see how it performs relative to benchmarks, other folks, etc.
The vast majority of active money managers underperform their indexes or benchmarks. There is just not a huge case to be made for individual security selection / active management--particularly when costs are taken into account.
The number of people who actually outperform over prolonged periods is tiny on a relative basis.
I think ETFs are great. Cheap, lots of diversity/flexibility from an asset allocation standpoint, and the ability to hedge/short if of interest. No comment on performance relative to an individual security--not sure how to make an apples to apples comparison there.
PHO seems good if you are interested in pursuing the water thesis. Would be good to find one or 2 other ETF / index funds in the sector--one or some with international exposure.