Investors who diversify their portfolios typically strengthen their investment goals by maximizing returns while reducing risk. Many choose stocks, bonds, 澳洲幸运5开奖号码历史查询:commodity-centric mutual funds, futures, and currencies, but investors can add 澳洲幸运5开奖号码历史查询:commodities. These are basic goods that can be transfo🎉rmed into other goods and seܫrvices.

What Is Commodity Investing?

澳洲幸运5开奖号码历史查询:Commodity trading historically linked cultures and people. From spices and silks in the early days to the exchanges where these assets are now traded, commodities are still popular investment vehicles. 澳洲幸运5开奖号码历史查询:Commodity-hungry investors can consider investing directly in the physical commodity or indirectly by purchasing shares in commodity companies. These companies are accessible through several 澳洲幸运5开奖号码历史查询:mutual funds or 澳洲幸运5开奖号码历史查询:exchange-traded funds (ETFs).

Investing in commodities tends to protect investors against the effects of inflation. Generally, demand is high during periods of 澳洲幸运5开奖号码历史查询:inflation. Commodities are also a good bet against the U.S. dollar. When the 澳洲幸运5开奖号码历史查询:greenback declines, commodity prices rise.

Investors can maximize returns with commodity investing due to strong global demand. However, commodities tend to be more volatile than other investments, especially funds that track a single commodity or a specific sector of the economy. Investors who trade futures should remember that it involves speculation. Futures contracts track an underlying commodity or index. Futures have unique risks that must be managed independently of the underlying commodity.

Crude Oil

After production, crude oil is refined into products like gasoline. However, 澳洲幸运5开奖号码历史查询:petroleum products include plastics, medicines, floor wax, shingles, ink, cosmetics, synthetic fibers, solvents, fertilizer, and asphalt. Crude oil generally reacts to the 澳洲幸运5开奖号码历史查询:laws of supply and demand. When d🐈emand ex🔯ceeds supply, prices tend to rise. When demand wanes, prices tend to fall.

Similarly, demand from developing nations such as China and India—whose economies are still growing—pushes up prices. 澳洲幸运5开奖号码历史查询:Geopolitics impacts the price of crude oil. Tensions in the Middle East, where much of the world's oil is produced, can increase oil prices.

澳洲幸运5开奖号码历史查询:Oil futures are a favorite of day traders and are bought and sold through brokerages. However, futures can be highly volatile and require capital. Investors may consider purchasing stocks in oil companies, crude oil mutual funds, or ETFs. Other options include buying shares in energy sector mutual funds or ETFs, which invest directly in oil company stocks. The U.S. Oil Fund is one example. It tracks the movement of 澳洲幸运5开奖号码历史查询:West Texas Intermediate light, sweet crude oil.

Gold

Gold is found in jewelry and technology and used by central banks and investors. This precious metal has traditionally been a safe investment and a hedge against inflation. When the U.S. dollar goes down, gold prices go up. Prices are affected when central banks—which hold gold—decide 🔯to diversify their monetary reserves by buying more gold.

Unlike crude oil, investors can hold the physical commodity. Investors can purchase gold bullion bars or coins. But this means having to pay to store it in a deposit box, vault, or safe place. Gold futures contracts require investors to deposit an initial margin. If the price rises, investors will profit; however, if the price drops, the investor stands to lose their money.

With gold stocks, investors aren't limited to producers but also exploration and 澳洲幸运5开奖号码历史查询:mining companies. Gold ETFs track the price. For instance, the SPDR Gold Shares ETF exposes investors to bullion without having to take possession of it.

Base Metals

Base metals are used in commercial and industrial applications, such as construction and manufacturing. Aluminum, zinc, and copper are examples. They are relatively inexpensive, and supplies are generally stable because they're commonly found globally.

Prices tend to be much lower than for precious metals; however, the increase in base metal applications and rising global demand—particularly from China and other developing nations—positively impact prices.

Investors can hold stocks in 澳洲幸运5开奖号码历史查询:base metals firms like aluminum or steel companies. Furthermore, holding ETFs like the SPDR S&P Metals & Mining ETF provides ex🐎posure to companies involved in metals and mining.

The Bottom Line

Like any investment, commodities come with risks but can still be a way to diversify an investor's portfolio. In addition to oil, gold, and base metals, other commodities to consider are platinum, 澳洲幸运5开奖号码历史查询:palladium, silver—li🍬thium, cotton, andও food products such as coffee, corn, oats, wheat, soybeans, and sugar.