CHAPTER 14

Commodities in a Portfolio

Diversification, inflation protection and risk

Opening question

“Do commodities really protect a portfolio against inflation?”

In this chapter

The three jobs investors give commodities: diversification, inflation protection and a source of return
How correlation drives the benefit of adding a volatile asset, with the portfolio-risk formula
Why correlations rise in some crises, and what that means for the "safe haven" story
When commodities hedge inflation and when they do not
Gold versus a broad basket: two different tools
How much to hold: typical strategic weights and a worked example with simulated portfolios
Rebalancing and the diversification return
What a Vietnamese investor already owns before adding commodities

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This chapter is in the full book

Chapter 1 is free to read online. The full text of chapter 14 — with its tables, figures, worked examples and practice lab — is available in the complete edition of Commodity Investing: From Theory to Practice (Volume 2, NXW Investment Library).

Read Chapter 1 free Get the full book — [email protected]

Sections of this chapter

14.1 Three jobs for one asset class

14.2 Correlation and diversification

14.3 When correlations rise

14.4 Inflation protection: when it works and when it doesn't

14.5 Gold or a broad basket?

14.6 How much to hold

14.7 Rebalancing and the diversification return

14.8 Implementation: what you hold matters

14.9 The Vietnamese investor's starting point

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