Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
The State Of The Economy - 28th July 16
Elliott Wave Crash Course - 3 Ways the Elliott Wave Principle Enhances Your Trading - 28th July 16
Japan's "Helicopter Money" Play: Road to Hyperinflation or Cure Debt Deflation? - 27th July 16
Monetary Zika - The Insidious Nature of Credit Expansion - 27th July 16
Gold and Pork Bellies - 27th July 16
Silver Is Insurance Against The Worst Part Of This Depression - 27th July 16
Don’t Buy The SPX Hope Stock Market Rally! - 27th July 16
Bitcoin $650 Still in Play - 26th July 16
Deutche Bank Stock Price Crash - The EU Has Problems Far Beyond the Brexit - 26th July 16
The Forex Markets Are Getting Exciting! - 26th July 16
Underpriced Silver Is the “Rip Van Winkle” Metal - 25th July 16
Declines in Multiple Market Indexes - 25th July 16
Retailers Are Doomed as Most Americans Are Too Poor to Shop - 25th July 16
Here’s One Currency That Could Go to Zero - 25th July 16
Stock Market Top is Expanding - 25th July 16
Silver Manipulation – Because They Needed the Eggs - 25th July 16
Silver Market COT Stuns: What's Going On Here? - 24th July 16
Gold Demand Remains Stable During Sector Weakness - 24th July 16
Sernova, Diabetes and Haemophilia - 24th July 16
Russia: Tensions, Turmoil, and Western Hubris - 24th July 16
Soybean Commodity Price to Soar Again - 23rd July 16
SPX Stock Market Uptrend Continues - 23rd July 16
Gold And Silver – Debt Addiction Will Carry Precious Metals Higher, Guaranteed - 23rd July 16
Pokemon Go - How to Play, First Use, Balls, Stops, Catching Pokemon's... Great Excercise! - 23rd July 16
7 Signs That the Gold Market Remains Resilient - 23rd July 16
Basic Income in The Time of Crisis - 23rd July 16
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16
Addicted to Debt - We Can’t Borrow from the Future Anymore - 21st July 16
Not Everything Is Bullish for Gold - 21st July 16
Don’t Get Sucked Back Into the Stock Market - The Big Picture Hasn’t Changed - 21st July 16
Silver – Caught Inside - 21st July 16
Forex: "The Markets Are Getting Exciting!" - 20th July 16
China Economic Troubles - Is Kyle Bass Finally Getting His Revenge? - 20th July 16
Why Lithium Will See Another Price Spike This Fall - 20th July 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