Alternative Investments Explained: How to invest in commodities
 

Alternative Investments Explained: How to invest in commodities

Wednesday, January 30, 2013. admin @themovechannel

After running through the various types of commodity investments on the market, this week Alternative Marketplace answers the next important question: how do you invest in commodities?

 

Alternative Investments Explained: from gems and stones to general property schemes, AlternativeMarketplace breaks down the alternative products vying for your cash and assesses which assets are worth taking the risk.

After running through the various types of commodity investments on the market, this week Alternative Marketplace answers the next important question: how do you invest in commodities?

Commodities are everyday assets, but they're also a useful way to diversify your investment portfolio beyond the commonplace. Cooper, crude oil and gold were highlighted by one survey from Barclays Capital as the top performing commodity products, but there are loads to choose from and an equally wide array of ways to put your money into them.

 

Stocks

When it comes to any alternative product, but particularly commodities, a sound way to hedge your bets and keep your stake relatively safe is not to invest directly in the product, but to take a more indirect route. Stocks allow you to do that: placing your money in a company that depends in the commodity leaves you less exposed to volatile price swings. Oil companies, such as drillers or refiners, are a popular choice. The whole thing is made even more reliable by the fact that company's financial details are available to the public. There are also other factors that can affect a company's stock price, especially in tough economic times, but stocks are easy to buy and trade - and, more importantly, track.

 

Futures market

Futures contracts are one of the most popular ways to invest in commodities. They are exactly what they say on the tin: a contract to buy (or sell) a commodity in the future at a specific price, allowing buyers and sellers to profit, or reduce the risk of loss, from price changes in the market. To take part, you either need to use a broker who deals with futures trading, or open up a brokerage account yourself. For inexperienced investors, the risks can be high due to the market's volatile nature.

 

Managed futures

Managed futures are pools or partnerships that allow investors to join together and invest collectively in a futures contract. Commodity Pool Operators will typically consult a Commodity Trading Advisor; combined with the pool structure, which required all parties to put in the same amount of money, the professional advice and reduced stake can help to lower the risks involved in commodity investments.

 

ETF, ETN

What are ETFs and ETNs? Exchange Traded Funds and Exchange Traded Notes. These are traded like stocks and allow investors to track the price of a product without investing directly.

For more information on commodity investments, click here.

 


Author - Dan Johnson

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