J.D. over on Get Rich Slowly has eliminated his debts and is ready to tackle his mortgage. He reckons you too can pay off your mortgage in half the time. I’m not sure that the technique he suggests works with UK banks, however.
I wrote recently about how you can improve your diversification with Exchange Traded Funds tracking government and corporate bonds.For some investors, further tweaks to their asset allocation can come courtesy of the new generation of Exchange Traded Commodities, which enable you to follow everything from the price of iron to the rising (or falling) price of a basket of agricultural goods.
My usual disclaimer about your own investments applies here as elsewhere. Arguably, you need to do even more research before you track commodities, as they’re a much more esoteric investment than a FTSE 100 tracker, say.
Why would you want exposure to commodities?
Commodities are an asset class that rise and fall over time, and are subject to bull and bear markets. In this, they’re not dissimilar to other assets – but they’re not closely correlated either. The price of, say, corn isn’t particularly related to the performance of the stock market, for example.
By buying commodities you can therefore diversify your portfolio over the long-term so it’s less dependent on the returns from shares. You might also hope to trade commodities, if you think you can buy when they’re priced low and sell when they’re high. (Far easier said then done, and plenty of boys in braces will hire you if you manage it regularly).
Commodities also offer a hedge against inflation. If the price of everything is going up, it usually starts or ends with commodities rising in value, too. Therefore, devoting a portion of your funds to commodities can help offset inflation-risk.
If the stock market doesn’t affect the price of a commodity, what does?
Lots of things.
The Simple Dollar has sparked a great debate about what to do with unused credit cards. One key thing to watch is your credit rating.
I’m a bank manager, don’t you know. Okay, I’ve been experimenting with Zopa, a peer-to-peer site for lenders and borrowers. Zopa is like an Ebay for money, in that you deal directly with Joe Public rather than institutions. If you fancy trying it, follow this link to Zopa and we’ll both get an introductory bonus. Please make sure you read the documents and make your own mind up about the pros and cons.
The FT columnist and renowned investor John Lee reckons UK small caps have been battered down so much by the recent mayhem that it’s time to buy. He’s been buying building stocks and hotel micro-chains.
