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Strategies & Market Trends : The Art of Investing

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Jan 16 4:00 PM EST

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Anchan

kidl

To: Kirk © who wrote (4338)	6/6/2022 9:14:00 PM
From: Sun Tzu	2 Recommendations of 10744

There was a very good article on investing in commodities on Bloomberg. Long story short, there was a very influential paper that showed adding 10% - 20% commodities to your portfolio does wonders for it and brings a magical kind of diversification to it that lowers volatility without hurting the returns. Once that paper came out, everyone rushed and bought oil to add to their portfolio. As a result it stopped being a diversifier and oil crashed with the rest of the market in 2008. That lesson has been lost on the investors. When everyone thinks the same thing and buys the same thing, the best case scenario gets priced in and the risk/rewards tilt the other way because the best case rarely happens...and even if it does, it is already priced in and the returns won't be much to write about.

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