Some Information for Beginners in Investing
Commodities are also known as uniform resources that are considered as basic goods. Corn, oil, and rice are examples of these. Each of these can be used in a variety of ways, and they have a high demand all across the globe. The practice of trading commodities can be traced back to hundreds of years. Nowadays, there are many ways to enjoy profits from commodities particularly from sites like Money Morning.
Categories of Commodities
There are two main categories of commodities: soft and hard. Soft are those that are ranched or grown like rice, soybeans, corn, and livestock. Hard are those that have to be mined or drilled such as coal, gas, aluminum, and gold. This distinction can be useful as you search for investment opportunities.
Types of Commodities
When you say commodities, there are four types to consider. These are livestock, agricultural, energy, and metals. Before learning to invest in commodities, it is imperative that you know the differences of these commodity types. Doing so will help you to identify the various investment opportunities that suit your financial goals and your tolerance for risk.
Agricultural refers to crops in the agricultural sector. Popular examples of these are sugar. cocoa, corn, wheat, and cotton. The risks here are often associated with weather disturbances and seasonal changes. You can read more about this by visiting this site: Money Morning.
Energy is one of the most well-known commodity types. Energy-type commodities include gasoline, heating oil, crude oil, and natural gas. Investors need to be aware of the negative impact of economic downturns on this type of commodity.
Livestock is considered the other half of agriculture. Examples of this type of commodities are chickens, hogs, cattle, as well as other animals. There are risks involved in livestock investments although they are lesser compared to agriculture.
Metals are commodities that have to be mined. These can be base metals and precious metals. Base metals are used for industrial purposes like lead, nickel, zinc, steel, and aluminum. Precious metals have a higher value and they can be used for investment or decorative purposes. Examples of these are gold, platinum, silver, and ruthenium.
How to Invest in Commodities
There are a couple of ways to invest in commodities and each one comes with a set of benefits and risks. You can invest by buying stocks from companies that produce commodities. It is also possible to work with commodity pool operators. You can buy shares in exchange-traded funds. You can also buy futures contracts. You may also use mutual and index funds for trading commodities.
Stocks are the most straightforward means to invest in commodities. An example of this is to buy shares in a mining company that deals with gold if you are interested in metal commodities.