The Beginner’s Guide On How To Start Investment In Commodities In Today’s Market
Fri, Mar 8, 2013
Start Investment In Commodities Now
Investment in commodities have many unique features which can make them better than most other widely-held investments like stocks, bonds, and real estate.
For example, commodities prices are not highly correlated to the prices of other financial assets. In the last great run for commodities in the 1970s, stocks fell 50% and bonds dropped steadily. Meanwhile, commodities like gold, oil, and silver delivered as much as 10-to-1 returns for early investors.
Furthermore, investment in commodities that act as hedge against inflation. In the years ahead that will keep commodities very much in demand from investors.
Here are the four best ways for individual investors to know how to invest in commodities :
Best Commodity Investment #1: Mining Stocks
Mining stocks offer investors the most leverage to commodities prices most of them will be able to handle.
Basically, mining companies live and die with the price of the commodities they mine. In bear markets for commodities, mining stocks tend to barely breakeven. They’re in survival mode. But in commodities bull markets, mining companies’ revenues, earnings and share prices soar exponentially.
Mining stocks are one of the simplest investments to make of all investment in commodities .
Best Commodity Investment #2: Exchange Trade Funds and Notes
Commodities-focused exchanged traded funds (ETF) and exchanged-traded notes (ETN) have exploded in popularity over the last few years.
The popularity is well-founded too. For the first time ever individual investors have been given an easy way to invest directly into commodities through ETFs and ETNs.
These funds are normally focused on investing in a single specific commodity like gold or in a basket of commodities like agriculture commodities including wheat, corn, and soybeans.
They trade like regular stocks on all the major exchanges. So investors can buy and sell them very easily and quickly.
Best Commodity Investment #3: Mutual and Index Funds
These are closely related to the commodity investment ETFs and ETNs noted above, but they are slightly different.
They are similar to the ETFs and ETNs in that they mainly stick to a specific commodity, predetermined group of commodities, or an index of commodities.
They are, however, normally structured mutual funds so they don’t trade like stocks. But they can usually be liquidated at their net asset value at the end of each day.
Best Commodity Investment #4: Managed Funds
Managed commodity funds usually consist of an experienced commodities broker or trader running a fund that individual investors can put their money into.
The commodities broker or trader then manages the money for a specified period of time and the losses and profits are distributed among the investors in the managed fund.
Much of the focus for most managed commodities funds is short-term trading. So investment returns will be volatile and will not be dependent on a bull or bear market in commodities prices.
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These investment in commodities however, are best suited for the individual investor. They are easy to buy and sell. They are liquid and can be sold like a stock during market hours or can be sold with a few hours or days of notice with commodity-focused mutual and managed funds. They can provide diversification across a number of different commodities too.
These are features and individual investor should have in their investments to ensure they can make a move when they want or need to make a move. And if you looking to figure out how do I invest in commodities, stick to these top investing in commodities to both jump on the ongoing commodity bull market (especially during a pullback like the current one) and stay safe at the same time.
Executive Editor, Contrarian Insights
The Group of Big Investors in United States.
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