How to invest in commodities

With commodities experiencing a bull run, they are an essential part of any portfolio.

Talking to the typical retail investor about their target allocation to commodities, you find that more often than not, the target allocation is zero. Private clients, who have access to more sophisticated advice, generally have slightly higher allocations of approximately 1%-3%, but still almost certainly lower than the 10%-20% allocation some experts recommend.

Connoisseurs of commodities compare their inclusion in an investment portfolio to the making of a fine martini. With commodities, like vermouth, a little goes a long way and makes the whole thing a lot smoother.

The smoothing effect of the asset class comes from the fact that commodities exhibit low or negative correlation with...

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