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Vanguard Commodity Strategy Fund Admiral Shares (VCMDX)

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  • Vanguard Commodity Strategy Fund Admiral Shares (VCMDX)

    Anyone invest in this fund?

    I am reading about alternatives, REITs, funds with less than 100% correlation with VTSAX.

    So far just reading but wondering if this added complexity is helpful or just added complexity?

    Anyone here invest in this fund?

    Vanguard Commodity Strategy Fund Admiral Shares (VCMDX)

  • #2
    “Composed of futures contracts and reflects the return for a fully collateralized investment in the Bloomberg Commodity Index. The benchmark combines the return of the Bloomberg Commodity Index with the return on cash collateral invested in 3-month U.S. Treasury bills.”
    Derivatives risk: the fund’s direct and indirect commodity-linked investments—such as commodity-linked total return swaps, commodity futures contracts and options on commodities futures contracts, commodity-linked structured notes, exchange-traded commodity pools or funds, and other commodity-linked derivative instruments—subject the fund to risks associated with derivatives. ”

    I don’t understand it. Do you? Please explain.

    Comment


    • #3
      Good bogleheads thread on the theme
      https://www.bogleheads.org/forum/vie...22149&start=50
      I wrote a post there last year

      Comment


      • #4
        1) It invests in a cyclical asset class with boom/bust cycles (rn we are in boom).
        2) It is actively-managed and therefore, non-diversified.
        3) It uses various leveraged products.
        4) ER is high for Vanguard standards (20 bps).
        5) It's purpose is as an inflation hedge.

        Nothing wrong with any of the above, but as long as you are aware of how it's structured, and you have a commodity allocation, then it would be a decent pick.

        Comment


        • #5
          Originally posted by xraygoggles View Post
          1) It invests in a cyclical asset class with boom/bust cycles (rn we are in boom).
          2) It is actively-managed and therefore, non-diversified.
          3) It uses various leveraged products.
          4) ER is high for Vanguard standards (20 bps).
          5) It's purpose is as an inflation hedge.

          Nothing wrong with any of the above, but as long as you are aware of how it's structured, and you have a commodity allocation, then it would be a decent pick.
          Pretty much agree, but just curious as to how something being actively managed is necessarily non-diversified?

          Certainly that’s not axiomatic.

          Comment


          • #6
            Originally posted by bovie View Post

            Pretty much agree, but just curious as to how something being actively managed is necessarily non-diversified?

            Certainly that’s not axiomatic.
            I guess it's not always true - I just meant it's not indexed, but actively chosen assets.

            Comment


            • #7
              3) It uses various leveraged products.
              "the fund’s direct and indirect commodity-linked investments—such as commodity-linked total return swaps, commodity futures contracts and options on commodities futures contracts, commodity-linked structured notes, exchange-traded commodity pools or funds, and other commodity-linked derivative instruments—subject the fund to risks associated with derivatives."
              I think I remember that it is important to understand exactly what you own. When you look at the holdings, it shows the government bonds. I suppose that is the collateral. Please explain a commodity-linked structured note and a commodity-linked derivative instrument. I have no doubt that the fund managers do, I doubt many that actually invest in the fund have anyway of assessing the risk of the instruments. This is deep ship.

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              • #8
                FFGCX tries to gain exposure to commodities through commodity focused stocks. Just fyi if they are rolling futures there may be periods where a large distribution is paid so careful holding this in taxable (see PDBC last year for instance). Nothing wrong with XLE, not quite diverse commodity exposure

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                • #9
                  I side with the view that a commodity fund just adds complexity. As an amusing aside, my son owns this fund. I tried to convince him that all he needs at 25 is the total stock market index. But at the moment stocks are down and this fund is up. I wish him well, but since I can’t really explain the fund’s performance I won’t be joining him in ownership.

                  Comment


                  • #10
                    Originally posted by Larry Ragman View Post
                    I side with the view that a commodity fund just adds complexity. As an amusing aside, my son owns this fund. I tried to convince him that all he needs at 25 is the total stock market index. But at the moment stocks are down and this fund is up. I wish him well, but since I can’t really explain the fund’s performance I won’t be joining him in ownership.
                    That is funny! I agree.

                    Complexity & confusion.

                    I am trying to read about alternatives & realestate & crypto.

                    I am also trying to learn Japanese.

                    I am not finding any of it easy to understand.

                    So far my favorite alternative is cash.

                    I feel like cash is understandable.

                    Taxable cash.

                    No it won’t compete with inflation, no it won’t even grow, but taxable cash will pay to fix the car or pay for a new roof if you need it at the same time the market is down.

                    So far i like my simple 2 buckets: 1. stock index funds 2. taxable cash.

                    complexity might be better suited for a smarter critter.

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                    • #11
                      Tangler
                      You could leverage your Japanese language lessons. Read all the financials in Japanese without translation and day trade on the Tokyo stock exchange and add a little safety with some currency hedges.

                      Just an observation. Seems like you are trying to find solutions to problems that you don’t have. Might want to fish more.

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                      • #12
                        “ Fish more”
                        Yes! excellent advice!

                        Comment


                        • #13
                          Originally posted by Tangler View Post

                          That is funny! I agree.

                          Complexity & confusion.

                          I am trying to read about alternatives & realestate & crypto.

                          I am also trying to learn Japanese.

                          I am not finding any of it easy to understand.

                          So far my favorite alternative is cash.

                          I feel like cash is understandable.

                          Taxable cash.

                          No it won’t compete with inflation, no it won’t even grow, but taxable cash will pay to fix the car or pay for a new roof if you need it at the same time the market is down.

                          So far i like my simple 2 buckets: 1. stock index funds 2. taxable cash.

                          complexity might be better suited for a smarter critter.
                          Make no mistake, the risk factors for bucket 2 have drastically increased. Cash is out of favor. Inflation is a terrible disruption. Logic tells me that I-bonds are a perfect solution. However, it’s a chess game.
                          Need an EID. Might as well expect someone to market a “service”. Want $500k in cash inflation protected, 50 EID’s for you , done. 5-10 years of 8% inflation will crush that taxable cash.
                          Many, many schemes will come out of the woodwork to “solve” a real problem that inflation causes. Historically, hard assets appreciate with inflation. No clue if inflation is “transitory” or how long.

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