Importantly, this research also suggests that commodities are innately less risky than shares - so further enhancing their risk reduction appeal.
Investing in commodity futures contracts was found to have delivered equivalent overall returns to the Standard & Poor's 500, the major US stockmarket index, in a 45-year period to the end of 2004. But the commodity futures produced these returns with smaller price swings - volatility - which equates to lower investment risk.
It remains unclear, however, why commodity futures, while being negatively correlated, should produce similar long-term returns as shares, and this is being further researched.
Are commodities futures too risky for your portfolio? Hogwash!
Knowledge@Wharton, 5-18 April 2006
Review by Steve Lodge.