6 Feb 2024
Market Metrics: Commodity Prices
- Posted by Dejan Pekic BCom DipFP CFP GAICD, Senior Financial Planner
This is another excellent example of why investors should avoid chasing sectors.
Investing in sectors sound sexy and yes an investor can take their block of capital and invest it all in either consumer discretionary or consumer staples or energy or healthcare or information technology or real estate or utilities or financials or industrials or materials or communication services.
This is what happened in 2022 when Russia invaded Ukraine.
Material prices boomed for both hard and soft commodities because of the fear that the reduced supply would be permanent and so investors bought big but this all reversed in 2023 with commodity prices subsequently being crushed.
Click for chart.
The lesson is not to chase sectors and not to invest all the capital in one sector but instead to invest in a number of businesses that repeatedly produce profit from the sale of goods and or services.
That is how you manage risk, that is how Benjamin Graham did it and that is how Warren Buffet has done it.
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