| As any financial planner would tell you, we should | | | | oil. My rationale for having some of these assets |
| diversify our portfolio into different asset classes | | | | is simply that commodities are real assets and |
| to manage our risk. The most common asset | | | | there is only so much of this stuff available so it |
| classes for retail investors are properties, shares | | | | will always have an intrinsic value. However, we |
| and cash but there are other lesser known ones | | | | did not want to have to deal with the physical |
| as well such as gold and other commodities. For | | | | commodity so we decided to buy Exchange |
| smaller Self Managed Super Funds (SMSFs) like | | | | Traded Funds (ETFs) that closely track the price |
| ours, property was not really an option because | | | | of the physical commodities. ETFs are traded on |
| we did not have enough funds to buy property. | | | | the stock exchange just like stocks. |
| Although it is now possible for SMSFs to borrow | | | | In June 2008 we put 10% of our portfolio in gold |
| money to buy property, I personally do not think | | | | and 10% in silver by buying units in GLD and SLV |
| it is a good idea because most of us already have | | | | which are popular ETFs that track the price of |
| a large exposure to property outside of super. | | | | Gold and Silver. GLD and SLV are priced in USD |
| For most people, the biggest part of their wealth | | | | and are traded on the US stock exchange. I did |
| other than super, is in their own home. As | | | | not know at that time that there is an ETF for |
| negative gearing is a popular tax minimization | | | | gold that is traded on the ASX under the code |
| strategy in Australia, many Australians (ourselves | | | | GOLD. There are also commodity ETFs such as |
| included) also own investment properties as well. | | | | USO which tracks the price of crude oil for those |
| Investing our super into properties would be | | | | interested in investing in oil, and DBA and MOO for |
| putting all our eggs into one basket so we prefer | | | | those interested in agricultural commodities. |
| to invest our super funds in other asset classes. | | | | Our investments in gold and silver were badly hit |
| At the start of 2008 our super portfolio was | | | | when commodity prices crashed from July to |
| mainly in cash. With all the volatility in shares, we | | | | November 2008. However, in AUD terms, our |
| did not want to have much exposure to shares in | | | | gold and silver investments still showed positive |
| our portfolio. With governments printing money | | | | returns because the Aussie dollar also dropped |
| freely while aggressively slashing interest rates, | | | | against the USD. The positive return is attributed |
| cash was not a much better option as we were | | | | purely to luck and not skill as we were actually |
| really not sure what that would do to the value | | | | bearish on the US dollar. Although these |
| of the dollar and how much yield we can get. One | | | | investments have not generated stellar returns, I |
| asset class we definitely wanted some exposure | | | | am still happy to hold on to them as alternative |
| to was commodities, especially the kind that was | | | | investments to stock and cash, just as a |
| of a non-renewable nature like precious metals or | | | | diversification for our investment portfolio. |