Money File- Bull Runs Leave Commodities Chip
Thursday, March 30, 2006SUSIE GHARIB: In tonight`s money file, cashing in on the bull market in commodities. Here`s John Waggoner, mutual fund columnist at "U.S.A. Today."
JOHN WAGGONER, MUTUAL FUND COLUMNIST, USA TODAY: You probably don`t buy carloads of coal or buckets of beans or gobs of gold. But if you had been, you would have noticed that their prices have increased pretty smartly lately. Is there a mutual fund that will help you take advantage of the bull market in commodities? Of course. Should you buy one? Possibly, but use them sparingly.
Commodity prices have been on an upswing for nearly five years now. Gold, for example, has soared from $260 an ounce in 2001 to more than $560 now. But it`s not just gold. Sugar prices are up 110 percent in the past 12 months. Copper is up 70 percent and crude oil is up 21 percent. Huge demand from China is driving prices up. And at least in the case of metals, tight supply is keeping prices high, too. You may be able to plant more corn next year, but you can`t just open a new lead mine.
Pimco, Merrill Lynch and Oppenheimer funds have all opened funds that invest in commodities. These funds aren`t the kind of wheeler-dealers that you`d see on the exchange floors. They track a commodity index, such as the Goldman Sachs commodity index and they don`t make bets on falling prices.
You can also invest in two exchange traded funds. The commodity index tracking fund trades under the ticker DBC and tracks a broad index created by Deutsche Bank. The more specialized Ishares Comex gold trust, ticker IAU, invests in gold bullion. Even in mutual fund form, commodities aren`t for the faint at heart. But recent research shows that they can improve returns if used sparingly in a portfolio of stock and bond funds. Otherwise, they could turn your portfolio from gold to well, lead. I`m John Waggoner.
