Commodities are investments that should be included in any healthy portfolio. They can be used to add a degree of stability that might balance out other investments that are more risky. For instance, even though commodities don’t offer dividends, they also do not go bankrupt. The diversification aspect of investing in commodities makes for a rounder and stronger retirement portfolio.
ETFs are one of the best ways to invest in commodities. You can find many commodity funds that specialize in making investments that are widely diversified. This can cover all the bases, because your success is not dependent on only one investment. If one isn’t doing well for a period of time, you can hopefully count on the others to keep your investments safe. The wide diversity method of investment might be considered the safest, but there are other funds that make their investments in only one particular commodity. That of course can put the entire amount invested in jeopardy if that commodity fails. But of course the opposite can be true as well. If you are so convinced that the commodity will be safe or even soar through the roof, then you can profit wildly on such a scheme. There are other funds that choose only one specific sector for investments. In this case, there can be diversified investments in many different commodities, but they are all within the same realm. This could be done for personal preference, such as those who want to take advantage of environmental concerns or are specifically interested in the health market. Another reason for choosing only one sector could be because of certainty that the market chosen is about to rise.
Managed futures are investments in commodities that are managed by professionals. This takes the guesswork out of making choices for the inexperienced investor. These are usually investments made in a number of varied commodities that can expect a steady return. These aren’t investments that are bought today and sold tomorrow, but are meant to be held for several years. Because these are long-term investments, they are especially good for adding stability to a portfolio. Since they are managed by investment professionals, the individual does not need to be involved in making day-to-day decisions. When left alone and not touched, they should provide a nice return.
Long-Term Investments in Commodities
When long-term investments are made in the commodities market, they are expected to still be viable in the next two to three decades. They usually move in cycles of anywhere from 10-18 years. The percentage of a portfolio given over to commodities can depend on the individual’s goals, but 5-15% is a reasonable amount. When an individual takes the time to study commodities, gets some training and begins to trade, there is money to be made. Unfortunately, this can be a long process until those results are achieved. For this reason, it’s worth finding a professional investor with solid achievements to handle commodity investments.