Every investor knows it’s important to diversify their
portfolios, writes David Fry, founder and publisher of The ETF Digest.
However, just diversifying into various market sectors that trend in the same direction doesn’t accomplish very much. Doing so may just add to transaction expenses and give investors a false sense of accomplishment.
Most knowledgeable investment professionals know that adding uncorrelated assets to an investment portfolio is more likely to accomplish true diversification, reduce risk and generate superior overall performance. New rumored and proposed commodity-based ETFs (silver, crude oil, and currency markets as well) are, for the most, part well-suited to achieve true diversification.
Most seasoned commodity traders are just as likely to be short a commodity as long. After all, we’re dealing with commodities. Commodities market prices, and to a lesser extent bonds and stocks, are driven higher or lower purely by perceived and real supply/demand factors. Unlike stocks, commodities have no “earnings