Yoshikami: You Need Commodities in Your Portfolio
As we face future inflation and a restart of global growth, investing in commodities makes sense now more than ever. Commodities you see are one of those rare assets that can be profitable in a variety of conditions.
If inflation occurs, commodities will likely do well as prices rise. Higher deficits are making inflation a more reasonable outcome than might have been the case in previous years. With so much stimulus money floating around, the pressure on prices is all but inevitable.
If global growth returns, the demand for raw materials including metals, food products, and energy will rise. The price of these assets already face upward pressure. China's recent appetite to purchase Australian mineral producers shows their understanding of the need to secure sources of raw materials to fuel their continuing economic expansion. China knows that growth requires commodities.
As global populations rises and land available for the production of food decreases, the world's consumption of oil , agricultural products, metals and minerals, will only go higher. It's a fact that a growing middle-class eats more and with the world standard of living slowly edging upwards, commodity assets, especially in agriculture, will benefit from higher demand.
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Some, including Jim Rogers, believe that commodities should be the primary asset in your portfolio strategy. Not all agree with this position but very few believe that an investment plan should exclude commodities.
In an inflationary or global growth environment, commodities should be a part of your investment strategy. The environment for the next 10 years requires this asset class; it's not just stocks and bonds anymore.
Michael A. Yoshikami, Ph.D., CFP®, is Founder, President, and Chief Investment Strategist of YCMNET Advisors, Inc., a registered investment advisory firm (www.ycmnet.com). Michael oversees all investment and research activities of YCMNET. He is a respected lecturer speaking frequently on market issues, tactical asset allocation, and investment strategy. He appears regularly on CNBC and CNBC Asia and can be reached directly at firstname.lastname@example.org.