Are you looking for a way to make easy money? There are many ways you can generate a profit like making investments. However, some people are skeptical about investing their money in things like stocks and bonds.
But what if we told you there are more valuable items to invest your money in and they’re things that we’re surrounded by? These items are called commodities. In this post, we explain the types of commodities you can invest in, how to do it, and the benefits you’ll experience from investing in them.
Types of Commodities
Commodities are tangible goods or raw materials that can be bought and sold in large quantities. These raw materials are typically used for consumer goods like jewelry. They are usually uniform in quality and interchangeable with other materials of the same type.
As an investor, you can diversify your mix of assets and spread risk across different types of assets. Here are the different types of commodities you can invest in.
Metals
Most people invest in precious metals like gold and silver. These materials are used to make jewelry like rings, earrings and bangles. You can search for the best place to buy silver which is a commodity that’s more affordable than gold but still has a higher return.
Copper is another form of metal that you can invest in because it’s a material highly used in the production of electrical wiring.
Energy
Energy materials like crude oil are used in several products like plastics and lubricant oils. It’s also used to make fuel for cars, trucks, and buses for transportation. Additionally, crude oil makes natural gas for stoves and geysers.
Agriculture
Agricultural commodities involve popular crops that make products in high demand. They include wheat for cereals and flour, sugar, coffee, soybeans, and corn. Crops are a source of food for livestock and humans.
How to Invest in Commodities
There are two ways you can invest in these different types of commodities. The first one is by buying commodities like silver and gold bars which you can keep safe on your property. This method may not work well for other types of material like crude oil or livestock.
Another way is to invest in a commodity either through stocks or EFTs. This is the ideal solution if you don’t have the space or the extra capital to store certain types of material. You can start by investing in commodity stocks which is when you put your money into companies that produce various types of commodities.
Are there Downsides to Investing in Commodities?
As with any type of investment, there can be some downsides to putting your money into certain types of commodities. In some instances, you may experience long periods of declining prices. Additionally, it can be extremely volatile especially if you’re investing in digital currencies.
On the other hand, investments in stocks and property can generate a regular income but commodities don’t provide regular income. Even though there are some disadvantages to investing in commodities, the pros outweigh the cons.
The Benefits of Investing in Commodities
Potential for Higher Returns
Supply and demand for specific products can increase the prices of some commodities. Furthermore, when there is a shortage of a certain commodity, its price can skyrocket, leading to significant profits for investors.
Tangible Assets
When you invest in certain types of commodities like precious metals and livestock you gain tangible assets. You’ll then have a sense of ownership and security and you may receive tax benefits from them.
A Hedge Against Inflation
Inflation has the power to fluctuate the value of stocks and bonds but can also result in a major price hike for certain commodities like gold and oil. This helps preserve purchasing power.
Diversifies Your Investment Portfolio
As an investor, your main goal may be to spread your money across a variety of asset classes. Investing in commodities can help you achieve that goal. If you’re already investing in stocks and bonds, then you should also put money into raw materials.
In different economic and geopolitical scenarios, inflation can react differently. So when you diversify your investment portfolio you can experience risk-adjusted returns with less volatility.
Final Thoughts
As you can see, there are many reasons you should start investing in commodities, especially if you want a higher return on your investments. Consider putting money into tangible assets that are easy to store like silver and gold. Or consider investing in commodity stocks.
Make sure you fully understand how the different commodities react to inflation and supply and demand so you can broaden your scope easily.
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