Commodities for the longrun!

 

Would you invest in commodities for the long term(many years) based on a buy & hold strategy ?

If history can give us a clue then NO WAY ! If you invested in 1871 in a basket of commodities like these in the Economist Commodity Price Index then every year up to 2010 you would get (after inflation) the amazing annual return(CAGR) of …… 0.003% !!!

The lesson is that commodities are for short term(a few years the most) plays and opportunistic trades ! But what is the explanation for these long term measly returns ? It’s not nuclear science , just simple logic !

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