Home Adviser Fund Update Does Your Portfolio Need Vanguard’s Commodity Strategy Fund? Published April 18, 2019 Vanguard Launches Commodity Strategy Fund Vanguard announced plans for a new fund this month, taking a plunge into an unheralded sector with its Commodity Strategy fund. The move is something of a volte-face for the Malvern, PA behemoth—less than a year ago, it restructured its Precious Metals and Mining offering, turning it into the more diversified Global Capital Cycles fund (VGPMX). Scheduled to launch in June, Commodity Strategy will be an actively managed, open-end mutual fund, overseen by Vanguard’s own Quantitative EquityThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. and Fixed Income Groups. It will offer only Admiral Shares, which require a $50,000 minimum initial investment, with an estimated expense ratio of 0.20%. It will be benchmarked against the Bloomberg Commodity Total Return Index, a basket of energy, crops, industrial metals, precious metals and livestock exchange-traded physical commodities contracts. Commodities have historically been a volatile stock market segment; Vanguard’s new fund will have some guidelines in place designed to combat such volatilityA measure of how large the changes in an asset’s price are. The more volatile an asset, the more likely that its price will experience sharp rises and steep drops over time. The more volatile an asset is, the riskier it is to invest in.. It will hold a mix of commodity-linked futures and Treasury Inflation-Protected Securities to hedge against wild swings in value. This “controlled approach,” the firm claims, will help protect investors against inflation while still allowing the fund to beat its benchmark, all without taking on excessive riskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline.. But is outperforming a benchmark like the Bloomberg Commodity Total Return Index really much to crow about? Looking back at the last 15 years, commodities had a brief moment in the sun: 10 months of strong outperformance leading up to and during the financial crisis in 2007 and 2008. Outside of that, the sector has struggled. The Bloomberg index’s 15-year cumulative return through March 2019 is -34.6%. Over that same period, the S&P 500 had a total return of 243.2%. And as you can see in the chart below, commodities have lagged the market by a significant margin since late 2011, when their paths diverged. Given that record, why is Vanguard taking the plunge now? A clue may be the share class structure: This new fund is aimed squarely at institutions and advisers, who often allocate a small percentage of their assets to commodities at all times, simply to enhance their overall diversificationA strategy for managing investment risk by investing in a mixture of different investments. Since different asset classes face different risks, even if one type of asset declines in value, others may not.. For such investors, Vanguard’s low-fee promise may prove tempting. On average, commodity fund fees run about 1.20%, according to Vanguard. PIMCO’s popular CommoditiesPLUS Strategy, with $2.7 billion in assets, has net expenses of 0.77%. Of course, it may well be that Vanguard’s skillful active managers can improve on their competitor’s results. But when deploying sophisticated derivativesA financial instrument whose value is tied to the value of another financial instrument, for example, a contract which gives the purchaser the right to buy a certain commodity at a certain price on a date in the future. strategies in a risk-laden sector is necessary to achieve even mediocre performance, we feel comfortable suggesting most investors should stay away. Note: Chart shows hypothetical growth of $1,000 invested in the S&P 500 Total Return index and the Bloomberg Commodities Total Return index. Source: Morningstar. We’d Like to Hear From You for Future Investing Topics One of our missions at Adviser Investments is to help people become informed investors, and we rely on your feedback to help us achieve that goal. If there’s a trend in the markets you’d like to know more about, a tricky technical term you’d like us to break down, or any other investing topic you think we should cover, we encourage you to contact us at firstname.lastname@example.org or by phone at (800) 492-6868. We welcome your suggestions about how to improve this bi-weekly newsletter. And we’re happy to answer any questions you may have about Adviser Investments—please don’t hesitate to call or write! New Podcast: Your Money’s Dynamic Duo—Investing & Financial Planning Investing gets all the press, but when it comes to your overall well-being, financial planning can be just as relevant to your success. Your complete financial picture requires focus on expectations and goals, expenses you have today and those you’re preparing for down the road. In the latest episode of The Adviser You Can Talk To Podcast, “Your Money’s Dynamic Duo—Investing & Financial Planning,” Director of Research Jeff DeMaso and financial planners Victor Colella and Andrew Busa discuss how our Adviser Investments team combines investing and planning to create long-term, risk-aware wealth plans for our clients. Please click here to listen today, and we encourage you to share our podcast with anyone in your life who might find it of interest. And remember, if you’d like to get a notification every time a new episode is released, sign up for a free podcast subscription. How to Know It’s Time to Hire a Financial Adviser As an examination of the risksThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline. and benefits of even a single fund shows, it takes a lot of skill and effort to sniff out the best opportunities in the sea of options available to today’s investors. Of course, if you’re reading this, you’re likely to be among the savvy and knowledgeable few who feel confident in your ability to do just that. Is it still worth your while to bring in a pro? At Adviser Investments, we think it can be—and not just because we are confident in the advice we give and the services we provide. We believe that the relationship between an adviser and a client is much like the one between a coach and an athlete. Even the most talented professional athletes still work with a coach—because they know that having an objective third party watching your performance and spotting ways to improve your technique is key to success. A good adviser can help you come up with a plan and stick to it through good times and bad, acting as the voice of reason that can help you stave off the panic and euphoria often induced by the market’s swings. And perhaps just as important, they can help you trim your sails and keep on course during periods of greater market volatility. The 10-year bull marketA period during which stock prices rise significantly from recent lows for weeks, months or years. has provided plenty of puff so far, but many investors are worried that there may be choppier waters ahead. That makes it a good time to review your current investment strategy with a professional and decide if you’re prepared. Before you make a change in your investment plan, take a step back and review your goals, your appetite for risk and your timeline. Have Your Goals Changed? When an investment plan is working well, it’s all too easy to set it and forget it—even though the long-term goals the plan is designed to achieve may change over time. If you anticipate taking your career in a different direction, have developed health concerns or feel a need to be closer to family, there may be good reasons to make some changes to your portfolio. (Diversifying your holdings if you expect to be working longer, or redeploying into shorter-term fixed-income assets if you’ll need a large sum in the near future for a down payment, for example). Still Have the Same Appetite for RiskThe probability that an investment will decline in value in the short term, along with the magnitude of that decline. Stocks are often considered riskier than bonds because they have a higher probability of losing money, and they tend to lose more than bonds when they do decline.? Few investors want to miss out on outperformance, and the strong returns on equitiesThe amount of money that would be returned to shareholders if a company’s assets were sold off and all its debt repaid. in recent years have provided little incentive to seek out other asset classes. But simply by holding on to equities during a period of strong growth in stockA financial instrument giving the holder a proportion of the ownership and earnings of a company. prices, you may find your assets becoming more concentrated—and your portfolio’s posture more aggressive—over time. A seasoned professional can help you review your investments and suggest ways to diversify your assets so that you’re not taking on more risk than you’d like. Has Your Investment Timeline Shifted? When markets get volatile, your personal investment timeline becomes crucial. A shift to more conservative or income-generating assets may be warranted if your retirement is no longer a faraway prospect. Conversely, for mid-career investors, selling on a dip may do far greater damage to your long-term returns than holding pat. Those are just a few of the concerns a good adviser can help you with—for more specifics on what to look for, please listen to our recent podcast on this topic. There’s one final factor to take into consideration when deciding whether you should hire an investment adviser: The relief you’ll feel simply having someone to help you shoulder the burden of monitoring investments and making decisions for your portfolio. After all, most savvy investors share a common goal—building up enough of a nest egg to make sure they can retire in comfort and security and enjoy this new phase of their lives. Bringing on a pro to help keep a weather eye on day-to-day market shifts can help free you up to enjoy the journey, confident there’s a skillful navigator at the helm of your finances. About Adviser Investments Adviser Investments is a full service wealth management firm, offering investment management, financial and tax planning, managed individual bond portfolios, and 401(k) advisory services. We’ve been helping individuals, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process., institutions and foundations since 1994, and have more than 3,500 clients across the country and over $6 billion in assets under management. Our portfolios encompass actively managed funds, ETFsA type of security which allows investors to indirectly invest in an underlying basket of financial instruments (these may include stocks, bonds, commodities or other types of instruments). Shares in an ETF are publicly traded on an exchange, and the price of an ETF’s shares will fluctuate throughout the trading day (traditional mutual funds trade only once a day). For example, one popular ETF tracks the companies in the S&P 500, so buying a share of the ETF gets an investor exposure to all 500 companies in the index., socially responsible investments and tactical asset allocation strategies, with particular expertise in Fidelity and Vanguard mutual funds. We take pride in being The Adviser You Can Talk To. Our minimum account size is $350,000. To see a full list of our awards and recognitions, click here, and for more information, please visit www.adviserinvestments.com or call 800-492-6868. This material is distributed for informational purposes only. The investment ideas and expressions of opinion may contain certain forward-looking statements and should not be viewed as recommendations, personal investment advice or considered an offer to buy or sell specific securities. The views expressed in this update are subject to change at any time. Mutual funds and exchange-traded funds mentioned herein are not necessarily held in client portfolios. Data and statistics contained in this report are obtained from what we believe to be reliable sources; however, their accuracy, completeness or reliability cannot be guaranteed. Our statements and opinions are subject to change without notice and should be considered only as part of a diversified portfolio. You may request a free copy of the firm’s Form ADV Part 2A, which describes, among other items, risk factors, strategies, affiliations, services offered and fees charged. Past performance is not an indication of future returns. The tax information contained herein is general in nature, is provided for informational purposes only, and should not be construed as legal or tax advice. We do not provide legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation. The Barron’s rankings consider factors such as assets under management, revenue produced for the firm, regulatory record, quality of practice and philanthropic work. This award does not consider client experience and is not indicative of future performance. Editors at the Financial Times bestowed “elite” status on 300 firms in the U.S., as determined by assets under management, asset growth, longevity, compliance record, industry certifications and online accessibility. The Adviser You Can Talk To Podcast™ is a trademark of Adviser Investments, LLC. Registration pending. © 2019 Adviser Investments, LLC. All Rights Reserved.