Commodities are everyday essentials, but did you know they were also investment opportunities? From the fuel in your car to the steak on your dinner table, commodities are raw materials. If you want to diversify your investment portfolio, commodities can surely take care of that. But is it wise to actually invest in them? Let’s take a look.
Tradable commodities fall into one of four categories.
Precious metals, like gold, silver, copper and platinum, are among the most popular kinds of commodity investments. Energy, which includes things like crude oil, natural gas, and gasoline, as also popular investment choices. Livestock and meat are considered commodities too. Live cattle and pork bellies are examples of these. If meats aren’t your thing, you can invest in agriculture instead. Corn, soybeans, rice, cocoa, coffee and cotton are all possible agricultural investments. When learning these markets, get professional advice so you can make the best commodity decisions for your portfolio (for example, by getting a Self-Directed IRA for Precious Metals).
You can invest in commodities in a several different ways. For some, buying the physical raw material, like gold bullions, is an easy way to invest. These items can be securely stored in an approved depository. For more experienced investors, using futures contracts or exchange-traded funds (ETFs) are ideal. After all, purchasing 300 gallons of crude oil isn’t exactly easy to store in your safe deposit box. A futures contract is an agreement to purchase or sell a specific quantity of an item at a pre-defined price at a designated time in the future. Hiring a professional to help manage your futures contract may be your best bet if you are a relatively new investor. Investing in commodity stock is also possible. Gold mining and grain stocks are popular choices today. You can also invest in a company that deals in commodities, like a heavy-equipment manufacturer who sells tractors to farmers.
Commodities are often used to hedge your investment funds during periods of instability, inflation, or devaluation. They should not be your primary investment, but they certainly do help to enhance your portfolio. Commodity investments typically move in opposition of stocks. Stocks can plummet when economic instabilities arise. But, in times of economic hardship, while money may be sparse, everyone still needs food and energy. Long-term investments require significant amounts of money, time, and research. These are best left to professionals.
Royal Legal Solutions has years of experience with commodities and trade trends. Our investment professionals can help you with your investment decisions, navigating the world we live in through stocks, trades and more. However, for all of the effort put into them, long-term investments tend to work well with a patient buy-and-hold approach.
Because large-scale commodity investments use economies of scale and predetermined prices, even small shifts in values can have large impacts. Because of this, experts typically prefer investing in commodity stocks over the actual goods themselves.
Investing in commodities can help protect your funds. Commodities are personal investments that take a bit of legwork to thoroughly understand. Whether you invest in a single commodity, a particular sector of commodities, or an array of different sectors – select options that make sense to you. Hiring a professional may be the best way to invest in commodities, whether you are buying the goods themselves of purchasing stocks.
Scott Royal Smith is an asset protection attorney and long-time real estate investor. He's on a mission to help fellow investors free their time, protect their assets, and create lasting wealth.
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