I have reservations chasing any singular theme...the most recent being gold/silver. I understand its place in a diversified portfolio but my reason for starting this thread was to formulate ideas on creating a well diversified portfolio of "real assets". What would these be and in what percentage would one hold them long term.
Real Assets to me include:
Precious Metals...Gold, Silver, Platinum, Palladium
Natural Resources/ Commodities...Food, Fertilizers, Fiber, Metals, Minerals, Energy (Oil, NG, coal, etc,)
REITs / MLP / Utilities...REITS, Argi-businesses, Poles, Pipes, dams, Towers, Cables, Wires
Companies that manufacture "things"...verses provide services...
Drugs & Medical Device/Equipment
rono has done a great job over the years of educating me on the importance of gold and silver well beyond the ordinary choices. Hopefully he will be kind enough to continue. Personally, my exposure to these metals come in the form of owning gold/silver within PRPFX = Permanent Portfolio. I also have PM mining exposure using USAGX = USAA Preciuos Metals and Mining and VGPMX = Vanguard Precious Metals. Also, I would assume I have smaller amounts of exposure of PM in diversified funds such as VWO = Vanguard Emerging Markets since much of the mining operations are located in these emerging countries. My goal is to maintain a 10% weighting in precious metals.
Natural Resources / Commodities:
Scott and others have been very helpful in providing commentary on these choices. I must admit I need to better understand all of the choices in this space as well as its place in my portfolio. I have exposure to this space through PCRDX = PIMCO Commodity Real Return Strategy D class. My understanding is that this fund purchases derivatives as well as preferred stock. Derivatives are buying futures in an asset verses owning the real asset so I am interested in clarifying in my mind the PCRDX's place in the commodities portion of my portfolio. Individual commodity stocks seem riskier than a collection of the stocks in a mutual fund or ETF. I also have a investments in:
VIS = Vanguard Industrial Materials
VDE = Vanguard Energy
Maybe Scott or someone else could provide a primer on this space. I would very much appreciate it. Again, 10% weighting in this area is my goal.
REITs / MLP / Utilities:
Here I own VNQ = Vanguard REIT, GASFX = FBR Gas Utilities, VOX = Telecom, MATFX = Mathews Asia Tech, PRMTX = Media and Tech, CSRSX = Cohen & Steers Realty Shares
This space seems plagued by bad news both inside and outside. A big driver of our economy was real estate development. It provides employment, consumer spending, manufacturing, as well as bank financing. Our balance sheet recession is slow to unwind and full of volatility (bad news) and real estate react directly to these dynamics. I wouldn't call this investment space dead money but it feels like it is on life support at times. Low interest rates should soak up some housing inventory but a home is no longer the "fake" wealth multiplier it once was. I am looking at REITS that manage rental property, retirement communities as investments that provide present income and future growth. Another 10% here as well
Here's and interesting chart on the risk/reward of holding differing allocations of real assets on the last decade:http://www.principalfunds.com/investor/promo/dra/effect.html?WT.mc_id=dra_micro_effects
That's enough for now...your comments very much appreciated.