Treven L. Ayers, MA, CFS, CFP® quoted in The Wall Street Journal.
The rise of exchange-traded funds and notes makes it easy for everyone to own commodities, and many financial advisers recommend small stakes as permanent elements of a diversified portfolio. But the average broad-basket commodities ETF has lost an average of 7.9% a year in the past five years through July, according toMorningstar Inc.
Still, some financial advisers say a small allocation to commodity exchange-traded products remains important for a long-term portfolio. Viewing the performance of a commodity ETF or ETN over a specific period of time in isolation would be a mistake, these advisers say, overlooking their diversification and inflation-hedging benefits.
“Historically, commodities have demonstrated attractive returns with long-term performance and volatility similar to equities,” says Treven Ayers, chief investment officer at Clearview Wealth Management. In addition, commodity investments may offer low correlation to other asset classes, counter-cyclicality and improvements in risk-adjusted returns, says Mr. Ayers, whose Charlotte, N.C., firm manages $70 million.
Commodities have been dragged down over the past 18 months, he says, but that won’t continue indefinitely and they now offer an attractive entry point. Just a 2% to 4% allocation is sufficient for most long-term investors with balanced portfolios, says Mr. Ayers.