If you look at the returns on unique assets like stocks, bonds, and real estate, you'll find that these are typically not highly correlated to commodities. By adding commodities to your portfolio, you diversify it and reduce the likelihood that the value of all your holdings will decline at the same time. This is great news when stocks are volatile and fall. It also makes perfect sense: products are another "basket" and you diversify by not "putting all your eggs in one basket." If you are an investment guru like Warren Buffett, there is no need to worry about this. For everyone else, diversification is simply a requirement. Since not all assets zigzag at the same time, this protects your portfolio from the inevitable market dips.
Participating in the commodities market used to be a challenge.
Either you had to be a wealthy person (due to the high minimum investment required to open an account) or you had to be familiar and familiar with commodity futures trading. commodity trading time in India. Every private investor can now allocate part of his portfolio to commodities by purchasing a commodity ETF. low brokerage commodity trading These exchange-traded securities can be traded on an exchange and are available through regular brokerage accounts. They are traded in one day and bought and sold in the same way as stocks.
There are now over a hundred different commodity ETFs.
So how do you decide to buy it? For most investors, it makes more sense to buy a large commodity index fund. Green India Commodity One widely used commodity index is the S&P Goldman Sachs commodity index (GSCI), which tracks 24 different commodity futures contracts. With this one-time investment, you can keep track of the price of all the world's most popular physical goods.
Commodities that are held in a diversified basket are typically less volatile than other high-risk asset classes, such as stocks. For example, during the global financial crisis a few years ago, stocks were more than twice as volatile as the S&P GSCI Commodity Index. best commodity trading broker in India A commodity ETF is an unlevered way to profit from rising commodity prices. This is very different from trading commodity futures, which involve a lot of leverage - a moderate change in the price of the underlying commodity can wipe out your account. This makes commodity ETFs much more suitable for the typical investor.
Who else invests in commodities besides individual investors? Hedge funds are very active in this market, as are annuities and insurers. University foundations also participate. For example, did you know that the Yale University Foundation uses more than twenty percent of its investment on raw materials? And Yale is no exception, with many other university foundations investing in raw materials or similar real assets like timber forests.
There is something to be said about "following the money wisely". There is no reason why the ordinary investor should not have a commodity allocation. They complement stocks and bonds, which are the cornerstones of most investment portfolios. I would not be surprised if in a decade or two more investments in commodities are as normal as in bonds and stocks.
Although commodity ETFs have become popular in recent years, some investment professionals still advise against investing in this market. commodity exchange in India The general criticism is that commodities do not provide ownership of something that has intrinsic value, unlike a stock that is owned by a potentially growing company. William Bernstein, a well-known investment writer, and portfolio manager compared investing in commodities to "picking up the nickel in front of a steamroller." In his own words, "the risk of being shot down is enormous." Another well-known writer and consultant, Rick Ferri, also tells them to stick with proven stocks and bonds.
In conclusion, it may be worth adding a commodity ETF to your investments if you haven't already done so. But don't take my word for it. Do your own homework before making any investment.
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