ETMarkets Smart Talk | Gold for ballast, silver for growth; avoid industrial commodities in core portfolios: Saish Sawant

Retail investors should be cautious about treating broad commodities as a standalone asset class, according to the guidance provided in the source material. The approach reflects three central concerns: high volatility, negative roll yields and the absence of cash flow.

Three challenges for investors

Commodity exposure can carry significant volatility, making it difficult to treat the asset group as a stable foundation for a portfolio. That concern is especially relevant when investors use broad commodities as a separate, standalone allocation rather than considering their specific characteristics.

Negative roll yields are another stated drawback. Along with volatility, they can weigh on the experience of holding broad commodity exposure. The source also points to the lack of cash flow, distinguishing commodities from assets that generate cash while they are held.

Portfolio implication

The central message is not to view broad commodities as a default core holding for retail portfolios. Their volatility, negative roll yields and lack of cash flow are the key factors behind that caution.

For retail investors, the guidance highlights the importance of understanding these characteristics before assigning broad commodities a standalone role in a portfolio.