If you are like many retirees and soon-to-be retirees, you may be rethinking your entire investing strategy. Stocks are down, interest rates are up, and inflation is eating away at your purchasing power.
One listener wonders, with everything going on in the world, should they shift their investments into commodities? In the listener question segment, I discuss what commodities are, how to invest in them, and share my thoughts on whether investing in commodities is a good idea.
Before the listener questions, we’ll explore a retirement headline written by Eleanor O’Sullivan at Rethinking65.com which examines what life might look like if more people live to age 114.
Join me on this episode of Retirement Starts Today as we explore the effects of technology on longevity and whether you should jump ship from your sinking stock portfolio to invest in commodities.If you are like many retirees and soon-to-be retirees, you may be rethinking your entire investing strategy. Click To Tweet
Outline of This Episode
- [1:32] Planning to live to 114?
- [3:15] Cell phones improve access and democratize healthcare
- [7:53] Technology can help in every aspect of our lives
- [11:03] Is it time to invest in commodities?
- [13:08] How to invest in commodities
- [17:55] My thoughts on investing in commodities
What is a commodity?
One listener who has been keeping up with current events has noticed that commodities are trending up while stocks and bond prices are falling. They are wondering whether owning commodities would be beneficial in balancing their investment portfolio.
Before I answer that question, let’s define what exactly a commodity is. Wikipedia tells us that a commodity is an economic good or resource that has substantial fungibility. The market treats instances of the good as equivalent or nearly so with no regard to who produced it.
In layman’s terms, this means that a commodity is an economic good that varies in price, and it doesn’t matter where that good came from.A commodity is an economic good that varies in price, and it doesn’t matter where that good came from. Click To Tweet
Why would someone want to invest in commodities right now?
Since we are in a period of high inflation, commodity prices look particularly appealing. One of the top commodity indexes is up over 35% this year while the S&P 500 is down over 20%. Since commodity prices rise when inflation accelerates, commodities offer protection from the effects of inflation. As the demand for goods and services increases, the price of goods rises along with the price of the commodities that are used to produce those goods.
How to invest in commodities
One of the top commodity indexes is the S&P GSCI Total Return CME. This index is calculated primarily on a worldwide scale and is comprised of the principal physical commodities futures contracts.
If you want to invest like an index or a benchmark, you have to invest in a fund that attempts to mirror that benchmark. One such fund is iShares S&P GSCI Commodity-Indexed Trust. The GSCI fund offers exposure to a broad range of commodities and access to a wide range of markets.
However, upon closer inspection, you might recognize that the commodities fund is comprised of hyper-concentrated bets in areas of the market that you already have exposure to if you own a diversified portfolio.One of the top commodity indexes is up over 35% this year while the S&P 500 is down over 20%. Click To Tweet
Are we traders, or are we long-term investors?
In order to invest in these commodities, we would have to take from our bonds, cash, or sell stocks to buy into this fund. After selling at a loss to chase the returns we would be buying high. This fund is up over 30% this year and 60% since last year.
Does it make much sense to sell at a loss to chase a gain?
To really consider this option, you would have to shift from being a long-term investor to being a trader.
Listen in to hear my views on trading commodities and learn what technology could mean for longevity. We’ll explore what the future might hold by utilizing technology in healthcare, education, and finance.
Resources & People Mentioned
- 88 Years Old and Planning on 114
- Brite ’22 Conference
- Primetime Partners
- Apax Partners
- Investopedia on commodities
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