No, You Shouldn't Own Commodities -- Ken French

Coming into this year, most investors were certain about three things:

  • International stocks would do better than U.S. stocks
  • Everyone should own emerging markets, which were “decoupled” from the U.S.
  • Everyone should own commodities, which were in the early stages of a decades-long bull market

Well, now international stocks have crashed farther than U.S. stocks and emerging markets have been absolutely crushed. And, after a major spike in the early part of the year, commodities have also crashed.

So is this a once-in-a-lifetime opportunity to climb about the commodities train, as many burned advisors are now saying?

No, says Ken French, professor of finance at Dartmouth’s Tuck School and the director of investment strategy at Dimensional Fund Advisors. There’s no reason for most investors to own commodities. Contrary to popular belief, they aren’t a good inflation hedge, and they don’t provide a long-term real return that investors aren’t already exposed to through normal stock ownership.

This is our third instalment of our conversation with Professor French. Last week, he discussed why index funds are still the wise way to go for the vast majority of investors and why market timing is a lousy idea.

See Also: Market In “Uncharted Territory”? Only If You’re An Idiot

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