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Originally Posted by WorldBoFree
Yeah, i mean what are the merits of taking the money i have in commodities and reallocating it to SH?
Commodity ETFs are pretty crappy as a long term hold (except for GLD, which actually holds physical gold, if you think it will go back up) because they just hold futures contracts (basically, every month they are selling expiring contracts and buying new ones) and don't track commodity prices very well at all.
The easiest way to think of them is buy them if you have a really good idea on what commodities will do in the near term. I have no idea, because so many things go into their pricing, so I don't mess with them.
As far as buying SH, the only reason to do it is if you are long specific stocks or market segment ETFs, and you think that the broad market is going to do worse than your specific picks. Buying both SPY and SH would be pretty silly.
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I mean, for me its so hard to know anything. No matter what i read about there are always exactly opposing opinions from seemingly smart people.
Yep. Sucks, doesn't it?
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Ive heard great rationale for holding gold and commodities long, and ive always heard great rationale for not.
There isn't really a way to hold commodities (other than GLD and SLV) long. There isn't an ETF that keeps gasoline or oil in some bunker somewhere.
You could overweight stocks in companies that benefit from higher commodity prices to hedge if you think that commodities might crush stocks in general. The nice thing is, if you buy broad market ETFs you are already equal weighting them.
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Question is, when to re balance? Do i sell gold now, take the loss for tax purposes, and buy back in at a lower price?
You just have to wait at least 30 days to rebuy it. Google "wash sale" for more info.
The general way to rebalance is to decide ahead of time what your asset allocation should be, and when your actual holdings get out of line with that
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Seems counter intuitive to me to ever sell things when they dip if you specifically bought them long. Then again, you could be holding junk for years and years that way too.
This is my problem so far with investing. Its impoosible to know anything with confidence.
There is a reason to sell things if you bought them long - namely, you realize that you were wrong or if the reason why you bought them no longer exists (it was undervalued in your opinion and the price rose to being overvalued). If you are still correct (nothing has changed other than the price), buying more of them because they are on sale would be the correct move imo.
I just hedge by holding loads of cash so I can buy when something is ridiculously cheap. Usually I hold bonds and REITS, but right now (with where yields on bonds are and interest rate risk being present) I am in cash.
I will admit (aka brag) that I got extremely lucky with getting out of bonds and reits within a day or two of being perfectly correct.