Based on monthly returns from an equally weighted index of non-leveraged, fully collateralized commodity futures have historically (1959-2004) offered:
The same return and Sharpe Ratio as stocks but without increased risk premium.
Returns negatively correlated with stocks.
Returns negatively correlated with bonds.
Positive correlation to inflation, expected or unexpected.
An asset that behaves differently from other asset classes over the business cycle.
Source: Yale ICF Working Paper No. 04-20 "Facts and Fantasies about Commodity Futures" June 14, 2004
Indexed futures may make sense if you:
Believe we are in a secular bull market for commodities.
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Please remember that commodity trading involves a high degree of leverage. That leverage allows for large returns, but also large losses. Due to the high degree of risk involved in high leverage, you should carefully consider whether commodity trading is appropriate for you.
Past results are not indicative of future results.
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