Using stock markets in Europe, how can I buy commodities / resources, to diversify my portfolio?
"I recommend avoiding trading directly in commodities futures and options.  If you're not prepared to learn a lot about how futures markets and trading works, it will be an experience fraught with pitfalls and lost money – and I am speaking from experience. Looking at stock-exchange listed products is a reasonable approach for an individual investor desiring added diversification for their portfolio.  Still, exercise caution and know what you're buying. It's easy to access many commodity-based exchange-traded funds (ETFs) on North American stock exchanges.  If you already have low-cost access to U.S. markets, consider this option – but be mindful of currency conversion costs, etc. Yet, there is also a European-based company, ETF Securities, headquartered in Jersey, Channel Islands, which offers many exchange-traded funds on European exchanges such as London and Frankfurt.  ETF Securities started in 2003 by first offering a gold commodity exchange-traded fund. I also found the following: London Stock Exchange: Frequently Asked Questions about ETCs.  The LSE ETC FAQ specifically mentions ""ETF Securities"" by name, and addresses questions such as how/where they are regulated, what happens to investments if ""ETF Securities"" were to go bankrupt, etc. I hope this helps, but please, do your own due diligence."
It's incredibly difficult to beat the market, especially after you're paying out significant fees for managed funds. The Bogleheads have some good things going for them on their low cost Vanguard style funds. The biggest winners in the financial markets are the people collecting fees from churn or setting up the deals which take advantage of less sophisticated/connected players. Buy, Hold and Forget has been shown as a loser as well in this recession. Diversifying and re-balancing however takes advantage of market swings by cashing out winners and buying beaten down stocks. If you take advantages of general market highs and lows (without worrying about strict timing) every few months to re-balance, you buy some protection from crashes in any given sector. One common guideline is to use your age as the percentage of your holdings that are in cash equivalents, rather than stocks. At age 28, at least 28% of my account should be in bonds, real estate, commodities, etc. This should help guide your allocation and re-balancing strategy. Finally, focusing on Growth and Income funds may give you a better shot at above S&P returns, but it's wise to hold a small percentage in the S&P 500 as well. "Aggressiveness in a retirement portfolio is usually a function of your age and your risk tolerance. Your portfolio is usually a mix of the following asset classes: You can break down these asset classes further, but each one is a topic unto itself. If you are young, you want to invest in things that have a higher return, but are more volatile, because market fluctuations (like the current financial meltdown) will be long gone before you reach retirement age.  This means that at a younger age, you should be investing more in stocks and foreign/developing countries. If you are older, you need to be into more conservative investments (bonds, money market, etc).  If you were in your 50s-60s and still heavily invested in stock, something like the current financial crisis could have ruined your retirement plans.  (A lot of baby boomers learned this the hard way.) For most of your life, you will probably be somewhere in between these two.  Start aggressive, and gradually get more conservative as you get older.  You will probably need to re-check your asset allocation once every 5 years or so. As for how much of each investment class, there are no hard and fast rules.  The idea is to maximize return while accepting a certain amount of risk.  There are two big unknowns in there: (1) how much return do you expect from the various investments, and (2) how much risk are you willing to accept.  #1 is a big guess, and #2 is personal opinion. A general portfolio guideline is ""100 minus your age"".  This means if you are 20, you should have 80% of your retirement portfolio in stocks.  If you are 60, your retirement portfolio should be 40% stock.  Over the years, the ""100"" number has varied.  Some financial advisor types have suggested ""150"" or ""200"".  Unfortunately, that's why a lot of baby boomers can't retire now. Above all, re-balance your portfolio regularly.  At least once a year, perhaps quarterly if the market is going wild.  Make sure you are still in-line with your desired asset allocation.  If the stock market tanks and you are under-invested in stocks, buy more stock, selling off other funds if necessary.  (I've read interviews with fund managers who say failure to rebalance in a down stock market is one of the big mistakes people make when managing a retirement portfolio.) As for specific mutual fund suggestions, I'm not going to do that, because it depends on what your 401k or IRA has available as investment options.  I do suggest that your focus on selecting a ""passive"" index fund, not an actively managed fund with a high expense ratio. Personally, I like ""total market"" funds to give you the broadest allocation of small and big companies.  (This makes your question about large/small cap stocks moot.)  The next best choice would be an S&P 500 index fund. You should also be able to find a low-cost Bond Index Fund that will give you a healthy mix of different bond types. However, you need to look at expense ratios to make an informed decision.  A better-performing fund is pointless if you lose it all to fees! Also, watch out for overlap between your fund choices.  Investing in both a Total Market fund, and an S&P 500 fund undermines the idea of a diversified portfolio. An aggressive portfolio usually includes some Foreign/Developing Nation investments.  There aren't many index fund options here, so you may have to go with an actively-managed fund (with a much higher expense ratio).  However, this kind of investment can be worth it to take advantage of the economic growth in places like China. http://www.getrichslowly.org/blog/2009/04/27/how-to-create-your-own-target-date-mutual-fund/" "Buy term and invest the difference is certainly the standard recommendation, and for good reason. When you start looking at some sample numbers the ""buy term and invest the difference"" strategy starts to look very good. Here are the rates I found (27 yr old in Texas with good health, non-smoker, etc): $200k term life: $21/month $200k whole life: $177/month If you were to invest the difference in a retirement account for 40 years, assuming a 7% rate of return (many retirement planning estimates use 10%) you would have $411,859 at the end of that period. (If you use 10% that figure jumps to over $994k.) Needless to say, $400k in a retirement account is better than a $200k death benefit. Especially since you can't get the death benefit AND the cash value. Certainly one big difficulty is making sure you invest that difference. The best way to handle that is to set up a direct deposit that goes straight from your paycheck to the retirement account before it even touches your bank account. The next best thing would be an automatic transfer from your bank account. You may wonder 'What if I can no longer afford to invest that money?' First off, take a second and third look at your finances before you start eating into that. But if financial crisis comes and you truly can't afford to fund your own life insurance / retirement account then perhaps it will be a good thing you're not locked into a life insurance policy that forces you to pay those premiums. That extra freedom is another benefit of the ""buy term and invest the difference"" strategy. It is great that you are asking this question now while you are young. Because it is much easier to put this strategy into play now while you are young.  As far as using a cash value policy to help diversify your portfolio: I am no expert in how to allocate long term investments after maxing out my IRA and 401k. (My IRA maxes out at $5k/year, another $5k for my wife's, another $16.5k for my 401k.) Before I maxed that out I would have my house paid for and kid's education saved for. And by then it would make sense to pay a financial adviser to help you manage all those investments. They would be the one to ask about using a cash value policy similar to @lux lux's description.  I believe you should NEVER PUT YOUR MONEY INTO SOMETHING YOU DON'T UNDERSTAND. Cash value policies are complex and I don't fully understand them. I should add that of course my calculations are subject to the standard disclaimer that those investment returns aren't guaranteed. As with any financial decision you must be willing to accept some level of risk and the question is not whether to accept risk, but how much is acceptable. That's why I used 7% in my calculation instead of just 10%. I wanted to demonstrate that you could still beat out whole life if you wanted to reduce your risk and/or if the stock market performs poorly." Edited because my first response was incoherent. The US and Western Europe have always had solid food and water supplies that helped them grow. The same can't be said for countries like Zimbabwe and other mineral rich countries. Diamonds and lithium and other similar commodities are only as valuable as they are because we have had the luck to grow our economy and technology to the point where we have the time/money to look into spending like that.   I find it hard to believe that we would be making smartphones if we didn't have the basic resources first. Buffet is in a different league from other value investors. He looks for stable companies with no debt and good management. Then he looks to deeply understand the industries of candidate companies, and looks for companies that are not in commodity businesses or sell commodities that can be bought for 25% of the valuation that he believes reflects the true value of the company. Deeply understanding the market is really the key.  Consider the Burlington Northern Santa Fe Railroad, which Buffet purchased last year. Railroads benefit from higher oil prices, as they can transport cargo much cheaper than trucks. They also tend to have natural monopolies in the regions they operate in. Buffet bought the railroad just as production of oil and natural gas in North Dakota started picking up. Since pipeline capacity between North Dakota and refineries in Texas/Oklahoma is very limited, the railroad is making alot of money transporting crude. Interactive Brokers offers many foreign markets (19 countries) for US based investors. You can trade all these local markets within one universal account which is very convenient in my view. IB offering I guess I wasn't clear. I want to modestly leverage (3-4x) my portfolio using options. I believe long deep-in-the-money calls would be the best way to do this? (Let me know if not.)  It's important to me that the covariance matrix from the equity portfolio scales up but doesn't fundamentally change. (I liken it to systemic change as opposed to idiosyncratic change.)   This is what I was thinking:  * For the same expiry date, find each positions lowest lambda. * Match all option to the the highest of the lowest lambda. * Adjust number of contracts to compensate for higher leverage.  I don't think this will work because if I matched the lowest lambda of options on bond etfs to my equity options they would be out-of-the-money.  By the way, thanks for your time. Are you willing to risk the possibility of investing to prepare for these things and losing money or simply getting meager returns if those crises don't happen? Just invest in a well diversified portfolio both geographically and across multiple sectors and you should be fine.