Welcome to the page Commodities. Make your own decision based on our tips on how to invest in commodities. Commodities, whether they are related to food, energy or metals, are an important part of everyday life. Similarly, commodities can be an important way for investors to diversify beyond traditional stocks and bonds, or to profit from a conviction about price movements.
Commodities markets, both historically and in modern times, have had tremendous economic impact on nations and people. The impact of commodity markets throughout history is still not fully known, but it has been suggested that rice futures may have been traded in China as long ago as 6,000 years. Shortages on critical commodities have sparked wars throughout history (such as in World War II, when Japan ventured into foreign lands to secure oil and rubber), while oversupply can have a devastating impact on a region by devaluing the prices of core commodities.
Commodities investing is volatile, promising big gains and capable of big losses. But this volatility can work in your favor in a broad investment portfolio, where a small amount of commodities can offset risks associated with stocks, bonds and cash.
There are different types of commodity investments for novice and experienced traders to consider:
Futures Market
Stocks
Exchange Traded Funds and Exchange Traded Notes
Mutual Funds and Index Funds
Managed Futures
Although commodity futures contracts provide the most direct way to participate in price movements, other types of investments with varying risk and investment profiles also provide exposure to the commodities markets. The key is to invest with the tool that works best for you.
Beware these dangers when investing in commodities:
•Scam artists: All legitimate brokerages must be registered with the National Futures Association with a list of all complaints, sanctions and arbitrations.
•Poor money management: Don't risk too much of your money on a single trade. And set clear entry and exit points.
•Lack of knowledge: The volatility of commodities means you must stay up to date on new affecting the markets you are trading.
•Costs: Brokerage charges vary and can be high, so know what you'll pay ahead of time.
Check our trading tips in the posts below.
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