There are many different styles, approach, and methods of investing. Many individual investors focus on trading (swing, positional, momentum, speculation, technicals etc.), while many others focus of investing (value, growth, blend, etc), and still many others on special situations (opportunistic, arbitrages, etc). In addition, there are quite a few individual investors that attempt at combination of trading and investing. Similar to glass being half full or half empty, I believe every style has its own pros and cons’ depending upon in what context one is looking at it. Individuals have to figure out what works best for them.
Readers are already accustomed to my approach of dividend investing. I am a long term buy and hold investor and prefer to buy my positions at fair values (fair value calculation methodology). The reason I use fair value is because, I do have enough expertise to determine the tangible book value. While I still use book value based on Graham’s method, it is not the only one on which I base my decision.
One common question that I continue to receive is about the efficacy of long term investing. The notable factor is almost all of them use two specific examples to explain that long term investing is not a viable solution. These examples are (1) Stock market tanking in 2008; and (2) Satyam going kaput.
Pidilite Industries Ltd.
Commodity Asset Class in Dividend Portfolio
One of basic tenets of portfolio construction is following the principles of asset allocation. This is much more applicable and valid for do-it-yourself individual investors. In this context, at a minimum, I need to look at and at least consider evaluating all possible asset classes. While doing this, I also have to keep in mind that my portfolio is based on dividend growth philosophy. Among others, a commodity is also one asset class which I believe I should be investing. The next question is what should be my investing vehicle?
In recent years, commodity has been in news due to continuous increase in market price. This price increase was not restricted to any one particular commodity, but just manifested itself to all types of commodities. Commodities include agriculture products (grains, oil seeds, fertilizers, pesticides), bullion (gold, silver, platinum), Oil and related products (crude oil, natural gas), chemicals and petrochemicals (additives, fibers, yarns, paints, polymers), Metals (iron, steel, aluminum, zinc, etc). So you see it is indeed a very large domain. Now what does it really mean to trade or invest in commodities? It does not mean we buy or sell or invest in real physical commodity. Continue reading rest of this article…