International funds=yes, Commodity funds=no

Two interesting points from Morningstar’s Christine Benz who was just interviewed on CNBC.

First, she noted that the recent slew of new commodity-related ETFs is reminiscent of the launch of technology funds at the height of the bubble in the 1990s. I couldn’t agree more.

Second, the strong recent inflows into international stock funds appear to be going into higher-quality core funds rather than chasing hot performers. Very encouraging.

Both international stocks and commodities have done well in the past few years. Skeptics are worried about bubbles in both asset classes.

The key difference is that international (non-US) stocks represent ownership of companies that will become more valuable as the global economy continues to develop. Through diversification and good stock-picking, there will always be opportunities to make money investing globally, whether you do it yourself or hire a manager to do it for you.

A good commodity trader can also make money by knowing when to be long and when to be short. If he’s wrong, he will lose his shirt because all he owns at the end of the day is “stuff”.

The Stalwart had a great post on this the other day, citing this gem (sorry, couldn’t resist) from Crossing Wall Street:

Remember that gold is simply a rock (or element, I suppose). It doesn’t do anything. In 10,000 years, gold will still be a rock.

Stocks, on the other hand, are part ownership of a corporation. They really do something—they create wealth. A company is individuals coming together to use things, like rocks, to make things that people need.