Lazy Man and Money

Investing in Agriculture? DBA vs. MOO

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A couple of days ago, I reviewed SigFig and declared it “The best way to track your investments.” In the review, I opened up my retirement accounts for the world to see. One thing that I didn’t address was the top recommendation SigFig made. Specifically SigFig attempted to scare the poop right out of my bum with a “DBA performs poorly AND charges you $74.89 more in fees to boot!” (Hey if I’m going to have a family-friendly website, I might as well write like 5 year old, right?)

No one wants to be in poorly performing investment and pay large fees to do it. Why did I choose DBA in the first place? I believe in Hedging Rising Food Prices and the PowerShares DB Agriculture Fund (NYSE:DBA) was the most obvious way to do it. DBA’s goal is to track commodity prices. So if wheat and soybeans get more expensive the stock should go up.

So if SigFig doesn’t like DBA, what does it suggest? It suggests Market Vectors Agribusiness (NYSE:MOO). Part of me wants to buy in on the ticker symbol alone. I looked into MOO a little more and here are the top holdings according to Morningstar: Monsanto Company, Potash Corporation of Saskatchewan, Inc., Deere & Co, Syngenta AG, Wilmar International Ltd, Archer-Daniels Midland Company, Mosaic Co, BRF – Brasil Foods SA ADR, Agrium Inc, Yara International ASA.

You know what I don’t see in MOO’s holdings? I don’t see corn, wheat, soybeans or any of that. I see companies like Monsanto and John Deere. The difference between what I own and the recommendation is pretty large. In SigFig’s defense, they are pretty clear that the recommendations are just suggestions.

Ask the Readers: If one is going to try to hedge against rising food prices, should he/she diversify within the category investing money in the commodities itself as well as the companies that help bring that food to your table? Let me know in the comments?

Hedge Rising Food and Gas Prices with ETFs

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I’ve been following the financial news a little more lately than I have in past. I don’t like what I hear.

An interview with a Shell Oil representative is claiming we might be paying $5 a gallon in two years. I shudder to think about what that means for me for California because we are up there with the most expensive gas in the nation. It’s a good thing that I work at home and don’t drive too much.

Then earlier today, I came across this article that predicted food costs more than ever and the United Nations says prices can go much higher.

Great googly moogly, higher gas prices and higher food prices?!?! What can be done about this? I’ll tell you what I’m doing: hedging my investments. When gas was cheap, I bought some PowerShares DB Oil Fund (NYSE:DBO). I also bought some PowerShares DB Agriculture Fund. Investing in these two commodities takes some of the sting away from rising prices.

Looking for a great way to complement that strategy? How about implementing these tips to save money on groceries and save money on gas?

What do you think? Are you hedging your bets against higher prices or not? Is now the time buy or have prices of these ETFs already risen too much? Is this six straight question I’ve asked? Yes it is.

How I Invested My Roth IRA This Year

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About a month ago, I asked you to help me invest my money. I got a lot of great recommendations. As he did last year, Get Rich Slick had the most creative idea, involving options trading. Like last year, I’m sure it will do fantastic. I’m currently not entirely comfortable with options at this stage. I understand the basics of how they work, but I would essentially be putting my money in something that I don’t understand. Doesn’t Warren Buffett say that you should invest in what you know?

I looked at the other suggestions. A few people mentioned investing in gold. I simply hate gold as an investment. I don’t like how it’s not a basic necessity of life in today’s modern world. It makes as much sense to me as investing in tulips. I know it’s stood the test of time, but I think times were different before flat panel TVs and flashy cars. People would use their gold collection to show off their value in society. Today, people use other possessions. I don’t see a trend toward people selling their useful possessions for a hunk of gold. If anything it’s the other way around.

I do recognize that gold has become a way to hedge inflation and the falling dollar. However, there are other ways to do that with assets that are required in the modern world. The rising price of oil is one such example. If all the gold disappeared from the earth, we could likely make due with copper wiring. If oil disappeared, much of the modern society would have great difficulty recovering. Another example is the raising cost of food. Again, it’s a basic necessity that people are required to buy.

For the above two reasons, I heavily considered oil (Powershares DB Oil Fund – Ticker: DBO) and food ETFs (Powershares DB Agriculture – Ticker: DBA). However, in the end, I decided that they were too expensive for me at this stage. They’ve simply appreciated too much in a small timespan. DBO is up 80% in the last year while DBA is up 45%. So I went with expanding my international exposure. I purchased 75 shares of Vanguard FTSE All-World ex-US ETF (Ticker: VEU), which is essentially unchanged over the last year. I felt I was underweight global stocks in what has increasingly become a global economy.

I want to thank everyone for their help. I found there was tremendous value in reading about different investment strategies.