Your Path to Precious Commodities

How much is appropriate? Every so often, someone smart will be quoted as saying investors should have 10%-15% in commodities. For people who hire professional management that might be true, but I think that is too much.

I maintain a 3%-4% exposure to gold, and I can see adding 2%-3% in the Agriculture Fund once I get a feel for how it trades on a day-to-day basis, but I would expect these holdings to be a drag on the portfolio if stocks go up a lot. Anyone speculating on commodities with a 20% portfolio weight is taking on a lot of risk. This may not be bad, but it is risk nonetheless.

One last point is that I have a lot confidence that these funds will capture the intended effect. However, they may not turn out to be the best commodity funds forever, if they even are now. I think there will be other funds that enter the space. If you use any of these funds for exposure, you need to pay attention when new products come out, because they may turn out to be superior.