Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Update - Nadeem_Walayat
2.Will Deutsche Bank Crash The Global Stock Market? - Clif_Droke
3.Gold Price In Excess Of $8000 While US Dollar Collapses - Hubert_Moolman
4.BrExit UK Economic Collapse Evaporates, GDP Forecasts for 2016 and 2017 - Nadeem_Walayat
5.Gold Stocks Massive Price Correction - Zeal_LLC
6.Stock Market Predicts Donald Trump Victory - Austin_Galt
7.Next Financial Crisis Will be Far Worse than 2008/09 - Chris_Vermeulen
8.The Gold To Housing Ratio As A Valuation Indicator - Dan_Amerman
9.GDXJ Gold Stocks - A Diamond in the Rough - Rambus_Chartology
10.Gold Boom! End Game Nears As Central Banks Buying Up Gold Mining Companies! - Jeff_Berwick
Last 7 days
Donald Trump Failing to Recover After 1st Debate Hillary Shimmy Loss - Betfair Betting Market - 30th Sept 16
BEA Revises Q2 2016 US GDP Growth Upward to 1.42% - 29th Sept 16
Could the OPEC deal set stage for the Next Stock Market Risk Rally? - 29th Sept 16
Why Trump Lost, Hillary Won the 1st U.S. Presidential Debate - 29th Sept 16
Is a Dollar Crash Imminent After the Senate Overrides Obama Veto on Saudi 9/11 Bill? - 29th Sept 16
2017: Gold and Silver's Year of "Public Recognition" - 29th Sept 16
Did Trump Win the 1st US Presidential Election Debate? - There's Something Happening Here... - 29th Sept 16
FED Goes from ZIRP to NIRP! - 29th Sept 16 - Chris_Vermeulen
Here’s Why You Should Be in Cash Right Now - 28th Sept 16
The Fed Put a 50% Tax on Your Retirement Plan - 28th Sept 16
Massive Chinese Debt And Why They Are On A Gold Buying Binge! - 28th Sept 16
Stocks Commodities and FX Markets Waiting Technically While Fundamental Data Neutral Poised - 28th Sept 16
This Commodity Has Perked Up its Investors' Portfolios - 27th Sept 16
Charting the Continuing Gold Market Correction - 27th Sept 16
Stock Market Crash and Recession Indicator Warning: Extreme Danger Ahead - 27th Sept 16
Financial Markets and FX Setups 27th Sept - 27th Sept 16
Crude Oil, Forex and Stock Market Trend Forecasts - 27th Sept 16
Why There is Trump - 27th Sept 16
Save Up to 70% in Shopping Expenses for Daily Items - 27th Sept 16
Gold’s Moving Averages and Long-Term Outlook - 26th Sept 16
September Stock Market - The Not So Silent Demise of Deutsche Bank - 26th Sept 16
SPX sell signal confirmed - 26th Sept 16
SPX is testing the next level of support - 26th Sept 16
Outrageously Entertaining US Presidential Campaign Final Stages - What Happens Next? - 26th Sept 16
BoJ, FOMC and Where To Now? - 26th Sept 16
Stock Market New All Time Highs Next - 26th Sept 16
Why Trump Will Win US General Election 2016 Prediction Forecast - 26th Sept 16
Martial Law Rolls Out Across the US As Jubilee Nears - 26th Sept 16
Stock Market More Correction Likely - 25th Sept 16
US Presidential Election Forecast 2016 - Trump Riding BrExit Wave into the White House - 25th Sept 16
US Economy GDP Growth Estimates in Free-Fall: FRBNY Nowcast 2.26% Q3, 1.22% Q4 - 24th Sept 16
Gold and Gold Stocks Corrective Action Continues Despite Dovish Federal Reserve - 24th Sept 16
Global Bonds: Why Our Analyst Says Things Just Got "Monumental" - 24th Sept 16
Where Did All the Money Go? - 23rd Sept 16
Pension Shortfalls Could Be 4X To 7X Greater Than Reported - 23rd Sept 16
Gold Unleashed by the Fed - 23rd Sept 16
Gold around U.S Presidential Elections - 23rd Sept 16
Here’s Why Eastern Europe Is Doomed - 23rd Sept 16
Nasdaq NDX 100 Big Cap Tech Breakout ? - 23rd Sept 16
The Implications of the Italian Banking Crisis Could Be Disastrous - 22nd Sept 16
TwinLakes Theme Park Summer Super 6 FREE Return Entry for Real? - 21st Sept 16
Has the Silver Bullet Run Out of Fire Power? - 21st Sept 16
Frack Sand: The Unsung Hero Of The OPEC Oil War - 21st Sept 16
What’s Happening With Gold? - 21st Sept 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The Power of the Wave Principle

Five Commodity ETFs to Invest in Right Now

Commodities / Commodities Trading Feb 28, 2013 - 02:28 PM GMT

By: Money_Morning

Commodities

Tony Daltorio writes: One of things all investors should know for 2013 is how to invest in commodities, as the prices of many of these products head for huge gains.

One of the reasons they will soar is because institutional investors have quickly abandoned them in the current risk on/risk off investment climate. There is right now roughly $424 billion invested in commodities, but that is a mere fraction of 1% of all global investment assets.


When all that money comes pouring back in, those commodity-related investments will skyrocket.

The few institutions that jumped into the market were disappointed because the commodities "super-cycle" did not generate spectacular gains for them in a year or two. Also, with inflation appearing to be nonexistent in the government-reported numbers, institutions are bailing on commodities.

For example, the giant California state pension fund Calpers last month slashed its meager 1.5% allocation to commodities to a miniscule 0.6%. It moved the money into the already bloated U.S. bond market, adding to its overweight position.

Just because institutions are short-sighted doesn't mean you should be. Keeping a percentage of your portfolio invested in commodities should help smooth out the effects of volatility.

With more and more central banks pursuing easy-money policies, currencies will fall and commodities will be more valuable to investors.

Also, keep in mind that emerging markets have not fallen off the Earth. They are still growing rapidly, and have a hunger for all sorts of commodities.

How to Invest in Commodities

There are two broad categories of commodities: hard and soft.

Hard commodities cover everything in the metals and energy areas including oil, natural gas, copper, nickel, gold and silver. Soft commodities include all the commodities that are edible including all of the grains, cattle, pork bellies, sugar, coffee, cocoa and orange juice. Cotton too is thought of as a soft commodity.

There are three ways investors can gain exposure:

buying the actual physical commodity (such a gold bar), purchasing futures contracts and investing in commodity stocks and exchange-traded funds (ETFs).

Futures contracts and options usually involve a high degree of risk because they are often short-term "bets" on price direction.

The safer play is to take a long-term approach through either individual commodity stocks or ETFs.

Investing in a commodity stock, such as the world's largest commodities company BHP Billiton (NYSE: BHP) involves the same process as buying any other stock. Macro-economic conditions, company management and balance sheet factors all come into play.

How to Invest in Commodity ETFs
The newest method of investing into commodities became part of the mainstream in recent years - exchange-traded funds.

Jim Rogers said that commodity ETFs offer individuals an easy-to-use method to profit from the combination of supply shortages in some commodities, rising demand in emerging markets, and easy monetary policies from the world's major central banks in the United States, Japan and Europe.

Some commodity ETFs allow investors to buy a basket of commodity-related stocks such as BHP.

An example of this type of ETF is the Market Vectors Hard Asset Producers ( NYSE: HAP). It is based on the index put together by Van Eck and Rogers and contains the largest mining and energy companies.

Others give investors exposure to an individual commodity or a basket of commodities through ownership of futures contracts. The PowerShares DB Agriculture Fund (NYSE: DBA), which invests in futures in all of the soft commodities from corn to cattle to coffee and cocoa, is an example of this type of ETF. The Teucrium Sugar Fund (NYSEArca: CANE) is an example of an ETF that owns futures on only one commodity - sugar, in this case.

Other ETFs actually own the physical commodity itself.

The biggest ETF of this kind is the SPDR Gold Shares (NYSE: GLD), which holds gold bullion in trust for shareholders. Another type of exchange traded vehicle is from the Sprott family and allows shareholders to actually take physical possession of precious metals. Sprott offers this for platinum and palladium, gold and silver - the Sprott Physical Silver Trust (NYSE: PSLV).

There are now a myriad of ways for the average investor to easily put some money into this third asset class. So now that you know how to invest in commodities, there is no excuse not to.

For more on how to invest in commodities, check out this latest report from Money Morning Global Resources Specialist Peter Krauth on one of his favorite picks for 2013.

Source :http://moneymorning.com/2013/02/27/how-to-invest-in-commodities/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife