Gold, Oil & Commodities: Is It Worth Investing?

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Gold, Oil & Commodities: Is It Worth Investing?

PensionCraft 02.05.2026 9 036 просмотров 397 лайков

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Every time gold or oil hits a new high, my YouTube comments fill with one question: am I too late? That's the wrong question. In this video, I explain which commodities actually earn their place in a diversified portfolio, why chasing a spike is how retail investors lose money, and how to buy broad commodities and gold for the lowest fee in the UK or the US. ✔️ If you want to learn more about investing, why not become a pensioncraft.com member? To find what we offer and how you can join our friendly community click here https://www.pensioncraft.com/investor-education/membership/ Build An All Weather Portfolio With Low Cost Index Funds https://www.youtube.com/watch?v=Y40P_ahfFic Return Stacking: Greater Return With Lower Risk - https://www.youtube.com/watch?v=DCyOEaeM9wk What Else PensionCraft Offers: 💡 Book a coaching session with Ramin so he can answer your questions in a one-to-one video call via Zoom: https://pensioncraft.com/power-hour/ 📰 Sign up for our free weekly market roundup to get news and views about what's going on in the stock market and wider economy https://pensioncraft.com/market-roundup/ 📖 Understand investment in more depth with my online courses https://pensioncraft.com/courses-we-offer/ ❓ Join PensionCraft on YouTube and you’ll be supporting me to make more content and I will answer your questions and respond to your comments on YouTube as a priority https://www.youtube.com/pensioncraft/join 🎧Check out our free weekly podcast "Many Happy Returns" on your podcast app of choice or at https://www.youtube.com/@ManyHappyReturnsPodcast The Following Data Sources Help Me Create My Videos (These links provide new users with a special offer and may also provide me with a small commission) ✔️ Stockopedia - New users get a special 25% discount on any annual plan if they use this link http://stk.pe/pensioncraft or enter our promo code 'PC25' at the checkout. ✔️ ShareScope & Sharescope Pro - special discount offers are available for PensionCraft viewers who use this link https://www.sharescope.co.uk/pensioncraftsp ✔️Bondfish provides bond market data, analytics, and broker availability. New users get a special 20% discount on the Premium plan when they use the promo code PENSIONCRAFT at https://bondfish.com/pensioncraft Timestamps 00:00 Introduction 00:30 Retail Flow Trap 02:11 Do Commodities Help 03:49 Inflation Shock Hedge 04:15 How Much Allocate 05:28 Broad Vs Single Bets 07:09 Gold And Safe Haven 08:48 Fund Mechanics Explained 10:45 US Tax Traps 12:16 Cheapest Funds UK 13:32 Cheapest Funds US 15:12 Portfolio Rules Rebalancing Where Else You Can Find Me 🌐 Website - https://pensioncraft.com/ 📱 Twitter - https://twitter.com/PensionCraft 👨 Facebook - https://www.facebook.com/pensioncraft/ 🔗 LinkedIn - https://www.linkedin.com/company/pensioncraft Take A Look At Some Of My Other Videos 📹 Investment For Beginners playlist https://www.youtube.com/playlist?list=PLlqeAQqQK7TcG9QNlRJ_QjI8iX_q_I8jo 📹 Investing For Retirement playlist https://www.youtube.com/playlist?list=PLlqeAQqQK7TcWFuRd51gkPyAGleZRvGcN 📹Investing With Vanguard playlist https://www.youtube.com/playlist?list=PLlqeAQqQK7TfMV4S_51E_zmbMio4UNBtM 📹 Portfolio Building Blocks playlist https://www.youtube.com/playlist?list=PLlqeAQqQK7TdRdp-hLnL5oxsaRjJZVSyn DISCLAIMER All information is given for educational purposes and is not financial advice. Ramin does not provide recommendations and is not responsible for investment actions taken by viewers. Figures that are quoted refer to the past and past performance is not a reliable indicator of future results. If you need financial advice, Unbiased, the UK’s leading online directory of financial advisers, can connect you to an Independent financial advisor for free. Additionally if you use our link to register with Unbiased, your first consultation with a financial adviser is free. https://imp.i337888.net/c/4012142/1936845/11746 (This link provides you with a special offer and we will also earn a small commission)

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Introduction

Every time gold or oil hits a new high, I get comments asking, "Am I too late? " But I think that's the wrong question. In this video, we'll find out why that's the wrong question, but also which commodities might earn their place in a diversified portfolio, but also how to buy them for the lowest fee in the UK or the US. And if you do find this video helpful, do click on like and subscribe. Now, chasing a spike is how retail

Retail Flow Trap

investors like you and I lose money on commodities. And I think the flow data tells the story pretty clearly. If you look at an ETF called GLD, that's the Spider Gold Shares Fund, that saw record inflows through the period from 2024 to 2025. And that was, and this is not a coincidence, right as gold was rallying 55%. And then in March 2026, it recorded the biggest single month outflow in its 21-year history. That was roughly $8. 5 billion out of the door over the space of 1 month. And this pattern's decades old. You see the same behavior at every cyclical top. We've seen this happen twice more in the last few years. For example, USO, which is the US oil fund, that took in record retail money in April of 2020 just as crude oil went to crazy negative prices briefly and then it underperformed the spot price, which is the price you see in the newspaper, by around 30% over the course of the next month. If we look at uranium ETFs, those have pulled in heavy inflows through 2023 and 24 with spot uranium, again the number you see in the newspaper, above $100 a pound. And then the price fell by roughly 40% by late 2024. So that pattern's really consistent. investors pile in just as we reach the top of the cycle and then they get washed out as the price collapses.

Do Commodities Help

So if chasing a spike is the wrong reason to buy commodities, what's the right reason? Well, this is the fact I think is worth knowing. If we do look at the long run, commodities have actually underperformed both stocks and bonds if you look at them on a risk adjusted basis. How do we measure that? Well, it's something called the sharp ratio, which is the return generated in percentage points by the investment divided by the risk measured as volatility. So, ideally, you want a high return for a low level of risk. And over the period 1973 to 2022, the Bloomberg commodity index earned a quarterly sharp ratio of about. 13, stocks earned. 21 and bonds earn. 18. But that overall number, which isn't great for commodities, masks an absolutely awful period for commodities after 2005. So if you look at the Bloomberg Commodity Index or BCOM, that had a sharp ratio, which is essentially zero. And what's really striking is that correlation with stocks, which is why you buy it as a diversifier, has flipped. So it went from minus. 3 pre205 a good diversifier to plus. 49 after 2005 which means it's not a great diversifier for equity. So that diversification benefit that once justified commodities being in a stock bond portfolio has really disappeared or at least reduced I'd say. But there is one thing that commodities still do well and that's the

Inflation Shock Hedge

inflation surprise hedge. So over 2005 to 2022, BCOM's correlation with unexpected inflation is actually quite high. It's 69. So yes, they do hedge inflation shocks and the intuitive reason for that is they're often the source of the inflation shock in the first place. So where does this leave the asset allocation question which is

How Much Allocate

how much to put into each different asset type. Well, if you look at this mathematically using something called efficient frontier analysis and you plug in the post 2005 BCOM data that actually assigns close to zero to commodities in a typical portfolio under typical conditions. Now, that sounds like a crushing defeat for commodities, but that's not what practitioners actually do. So, if you look at AQR's 2024 paper about strategic asset allocation, that showed that commodity allocation would cluster at between five and 10% for its typical constrained scenarios. And if you look at Ray Dalio's all-weather portfolio that has 7 12% in broad commodities and another 7 12% in gold. What those practitioners are pricing I think is what the mathematics is missing. Things like inflation surprise protection or regime diversification. We get high commodity price regimes for example. So these are the environments which the back test just didn't see. So if 5 to 10% is roughly the right size

Broad Vs Single Bets

which commodities make up those 5 to 10%. If we look at the correlation structure, so this is how prices move up and down together, you can see that the commodity funds cluster pretty tightly. So precious metals move together. That means they're close together on this tree. And if you look at broad commodity baskets, they also move together. If we were to look at individual commodity funds, those would be on disperate parts of the tree because they're not highly correlated with each other or the broad commodity baskets. Now, the distances you can see on this tree, those horizontal lines tell you how much diversification you're actually getting. And this is why broad exposure beats single commodity bets. There's a paper by Herb and Harvey which shows that the average correlation between individual commodities is only around minus. 09 essentially they're uncorrelated. Now intuitively that makes sense. Why should pork bellies move in sync with gold say? But that's also the mechanical source of the rebalancing return. So if you hold a basket of uncorrelated assets and you rebalance them, then you earn a premium just from that act of rebalancing itself. So which two categories actually work? Broad commodities earn their risk premium largely through that rebalancing return. And that's because the intercomodity correlations are so low. So if you have an equal weighted rebalanced portfolio, it'll earn around 3% a year over the weighted average of its constituents. Now gold is

Gold And Safe Haven

structurally different from other commodities. So there's a paper by BA and Lucy which found that gold does work as a safe haven for stocks in extreme market stress, but it only works for about 15 trading days. After that, gold investors typically lose money. An Urban Harvey's Golden Dilemma paper finds that gold hedges inflation only on horizons measured in centuries, not over retail investment horizons of say 10 years. In other words, gold's a short-term insurance policy for stock market stress, not a long-term inflation hedge. And of course, it's been handy recently when stocks and bonds fell together and gold held up. So, what's worth owning and what isn't? Well, single commodity funds, things like uranium, oil, copper, those are speculation, I'd say, not strategic allocation. Now, if you want to know exactly which funds give you that broadbasket exposure, but at the lowest cost, that's what our PensionCraft membership is for, you get access to our full tracker suite, an extensive library of exclusive videos, and a community of friendly investors who you can ask questions from anytime you like. We'll look at the specific fund recommendations later in this video. But that's based on a small snapshot of the resources available to our members, but if you do want to go deeper, just go to pensioncraft. com/membership to learn more. And that link will be in the description below. Knowing you want broad commodities and gold is really

Fund Mechanics Explained

only half the answer. The other half is picking the right fund. And this is where a lot of retail investors go wrong. So let me start with what I think is the most important thing to think about and that's beautifully illustrated by looking at these two lines. If you look at the WTI spot price, that's the price of oil in the market and compare that with the USO ETF which is an oil ETF. The difference between the two is caused by something called roll drag or roll cost. To understand this role cost, you have to understand a very simple concept, which is that the commodities fund will buy futures and the shape of the futures curve is usually upward sloping. So you're buying at a high price, you're selling at a low price to keep the exposure and that difference between the two is a continual cost. So there are various clever ways you can minimize that. But how a fund rolls those futures matters almost as much as the commodities it buys. Now for gold, the question's much simpler and that's because gold funds which are called gold etc. usually those hold physical bullion in allocated vaults. There's no role question at all. They're not buying futures. They're buying the metal and storing it. For broad commodity funds in Europe, USITs funds tend to use swap replication because USITS diversification rules make it hard to hold these concentrated futures positions directly. So with these synthetic funds, the fund manager enters into a swap which is a derivative with a bank sometimes with multiple banks to deliver the index return. And to keep things safe, they have a collateral basket which is topped up daily at 100 or sometimes even 120% of the value of the exposure. So these contracts do introduce some counterparty risk, but generally it's pretty well managed. Now

US Tax Traps

if you're a US investor, there's one more tax wrinkle to think about. And I know that across the pond, you're very keen on your acronyms. So, brace yourself because they're about to come thick and fast. Now, some US commodity ETFs are structured as partnerships. DBC and GSG are the common examples and these issue K1 tax forms. And inside a US individual retirement account or IRA, if the total positive UBTI, which is unrelated business taxable income, if that reaches $1,000 or more, the IRA itself has to file a form 990T and pay tax on that income at trust and estate rates. And the current top federal rate is 37% in 2026 plus a few hundred dollars you're going to have to fork out in custodian or prepare fees to handle the filing. Now obviously people want to avoid that tax headache. So for American investors the solution is often to avoid that partnership structure altogether and the CC Corp and 40 act alternatives. So that would be funds like PDBC and BCI are the main ones. Those issue standard 1099 tax forms and they avoid the K1 and UBTI issue completely. So with those rules in mind, the right commodities and the right fund structure, let's look at the specific options in each jurisdiction.

Cheapest Funds UK

Here's the cheapest funds page for our premium website members. And if you look at the UK and you look at broad commodities, the cheapest fund here at the moment is the LNG all commodities fund which has a fee of 0. 15%. Below that you can see three providers tied at. 19%. All of those track the Bloomberg Commodity Index and UBS CMCI charges a fee of. 34% and that's a RO optimized alternative that we talked about previously. All of those are usage funds which give you certain protections and they're all eligible for your ISA, your individual savings account and your self-invested personal pension or SIP account which means they're very tax efficient for UK investors. On the same page, we can also see some UK gold funds and there are four providers which charge fees of. 12%. That includes a Mundi, Invesco, EyesShares and Wisdom Tree. And Wisdom Tree also offers a sterling hedge version of their gold fund at the same fee. And we also have some UK physical silver funds. So Invesco and Eyesshares at. 19% and2% respectively. For US investors, we

Cheapest Funds US

can use the same page, but we just check a different box for country. And we can see those non-K1 funds that we discussed previously which are more tax efficient. BCI for example at 26% tracks the Bloomberg commodity index. PDBC at 0. 59% uses this optimum yield roll methodology. So that minimizes your roll cost. Now both of those funds issue 1099s and they avoid this UBTI trap. We can also see gold funds here. So for example, I AUM has a fee of 009% and GLDM is. 1%. Both of those are granter trusts. Both of them are 1099 issuing. And both of them mean you don't have to worry about UBTI. And they track physical gold at roughly a quarter of what the GLD fund charges, which is 4%. And if we look at US physical silver, there's the Abedine SIVR fund at. 3% and there's EyesShares SLV at. 5. And for our European members, the cheapest funds page lists commodity ETFs in euros, too. We won't go through them here, but they're all on the same members site. So, the right choice depends on a few things. The rapper is or SIP in the UK versus taxable. In the US, you've got IRA or 401k. Another consideration is the currency which you invest in. And then finally, which role methodology you prefer because some are a lot cheaper than others. So there we are. Those are the commodity funds. But how do they sit

Portfolio Rules Rebalancing

alongside your equities and bonds? There is no right answer for this, but what people often do is to copy Ray Dallio and they allocate between five and 10% to commodities in their portfolio. You'd split it roughly half and half between broad commodities and gold. And then any rebalancing that you do should be based on rules. It shouldn't be based on your judgment. So if the portfolio drifts away from your desired weights in your portfolio that could trigger a rebalance or you could simply do it on a calendar basis every year, say, or on a combination of those two things. But the key thing to remember is that the hardest part isn't starting the allocation when there's enthusiasm. It's holding it through a 2013 style or a 2023 style drawd down of 20% or more. And yes, that means you mustn't abandon the position at the low or double up at the next high. And I wouldn't underestimate the discipline required to stick to those rules. So now let me turn it over to you. Do you currently hold commodities in your portfolio and why did you buy them? Was it because of FOMO or was it to do this kind of strategic hedging? Be honest. Let me know in the comments. And if you do want the portfolio integration case in detail, then check out the return stacking and all weather portfolios which are linked in the description. And don't forget our membership. You can always sign up for that too. Just go to pensioncraft. com/membership to learn more. And as always, thank you for listening.

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