One key to generating better returns is buying commodity futures, not physical commodities, according to Credit Suisse Global Investment Returns Yearbook
If your broker is pitching you on the idea of investing in commodities, you should pay close attention to the tables buried deep in the 2023 edition of the Credit Suisse Global Investment Returns Yearbook.on Thursday. It provides exhaustive detail on many topics, including why you should not make a habit of investing in individual physical commodities.
Given those dismal results, is there still any case to be made for holding commodities? Surprisingly, there is, according to Elroy Dimson, Paul Marsh and Mike Staunton, the three British academics behind the yearbook. But commodities don’t all move together. A portfolio that held equal amounts of all these commodities would have historically generated a positive return by offsetting the steady drip of losses from most commodities with big gains on the handful of commodities that were spiking at any given time.
Unfortunately, the practical obstacles to achieving that profitable inflation hedge seem rather large. For one thing, commodity markets are limited in the amount of investment they can handle. If everyone attempted to increase their exposure to commodities, there would be problems, the yearbook authors note.
Younger investors are likely to reap portfolio returns only about half as large as their baby boomer predecessors, according to the Credit Suisse team.
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