How To Invest in CommoditiesEver wonder, how to invest in commodities? Of course with their limited supply and ever growing demand there can be some good reasons to buy them. But how can you go about investing into some commodities. Well if you think the price of a commodity is likely to go up there are 3 different ways which you can take advantage of it. 1. Buy The physical Item Of course if you think gold is going to go up and you have enough money you can always turn your basement into a mini Fort Knots. But this is the hard way of doing it. You have to buy the commodity and store it somewhere and then when you are ready to sell you have to go out and find someone who will actually buy it from you. (Not to mention all the added security you would have to get if you really do have a ton of gold lying around.) Pretty difficult. 2. Commodity Futures Market This allows people to buy a commodity in the future. So for example an investor can buy 100 barrels of Oil to be delivered in 3 months. As the value of that commodity goes up the investor makes money, as it goes down the investor loses money. This allows you to invest your money in a commodity without having to go out and actually buying it. There is only one problem with this approach. If you don’t sell the contract before the due date you are going to end up with 100 barrels of Oil. That might not be so bad if can sell it or have a real gas guzzler for a car, but there is a much better way to start investing in commodities. 3. Buy a Commodity ETF Commodity ETFs are a much better choice for the average investor. A commodity ETF holds a stock pile of a specific commodity. For example GLD holds a stock pile of gold. By buying a share of GLD the investor does not receive any gold, but they get exposure to gold and should benefit as the price of gold goes up. This lets an investor hold onto their commodity as long or as short as they wish without them having to go out and obtain the physical commodity themselves. Return from How to Buy Commodities to What are ETFs Go from How to Invest in Commodities to What are Commodities |
