I have been a believer in commodity exposure since way back, but I always repeat my belief in having MODERATE exposure.
My thoughts about my commodity exposure is not that I am “going long commodities,” but that I am adding in a little zig to my stock market zag (to be clear, I do have long exposure - I just don’t view it as a “bet on commodities”).
There is plenty of research that compellingly argues for 20%, give or take, in commodities and some readers subscribe to that line of thinking, but I have never been comfortable with a number anywhere close to that.
In buying gold, I hope I am buying a little something what will go up if there is an external event that crushes the market so in a way the price does not matter. No matter where gold is today or where it was yesterday if there is a terror attack tomorrow, I think gold would go up.
Another aspect about small commodity exposure versus large is how levered you are to one theme. If you were 20% yesterday you really need to decide what you think the March 19 and 20 sell-off mean and whether or not you need to do anything about it. With a 3 or 4 or 5% weighting the consequences for being wrong are much less which makes managing a portfolio much easier.
At least that’s the way I see it.
Good call. :’)