Anyone who has been paying even mild attention to the financial markets over the past few years has probably noticed the stunning gains in commodities markets. Perhaps not surprisingly, investors are increasingly seeking out investments in commodities, and there are more mutual funds than ever before in the marketplace that provide exposure to these types of investments.
As a general rule, we at Morningstar seldom endorse performance chasing--that is to say, jumping into a hot asset class. All too often, it simply works out badly for investors. By the time investors buy into that sizzling area of the market, it's usually ready to cool off.
That said, the potential portfolio diversification benefit from commodities could be a compelling reason for risk-tolerant investors to allocate a small portion of their portfolios to the asset class. Before you do so, however, take time to consider the pros and cons.
What Are the Potential Benefits? >>