Advantages of Commodity Funds

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Advantages of Commodity Funds
Since the beginning of the new millennium, an
increasing number of investors have begun moving
towards commodity investments. Commodity
investments have several advantages over regular
bonds and stocks. Although the SEC does not
recommend putting all your funds into a single
asset group like commodities, adding some
commodity funds to your portfolio with services
like Richard Cayne Meyer can yield some huge
returns.
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Commodity Investments
Commodities are any resources that can be traded
or sold. They include products like oil, gold and
even milk. There are different ways of investing
in commodities. You could actually buy the raw
commodities, and this works well for smaller
products like gold, but may not be practical for
others. Instead of buying hundreds of gallons of
oil to be stored in your home, you can actually
buy stocks in companies that produce these
commodities, such as oil and mining companies.
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High Returns
Commodities are widely considered high risk
investments because of their volatility.
Commodity companies normally score big time on a
resource discovery or at the same time hit big
loses. This creates a platform for the
possibility of high returns in commodities
provided your investment is timed accordingly.
Many investors fail to time appropriately and the
consequences can be dire. For this reason, it is
important to back your commodity investments with
secure assets.
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4
Diversification
Commodities offer diversification. This is when
you invest in different industries that respond
differently to fluctuations in the market. It
helps keep steady returns, and avoid huge losses.
For instance investing in oil and car companies
provides security against losses when oil prices
rise. In this case, the value of your oil stocks
will climb while the car stocks will drop.
Commodity investments normally move in the
opposite direction unlike stocks and bonds.
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5
Inflation Hedge
Inflation is bad news for any investment. When
the value of the dollar drops, American bonds and
stocks also fall in value and earn less compared
to the rest of the world. When the dollar loses
value, it costs more to buy goods overseas. This
forces commodity prices up during periods of
inflation. Prices also rise because investors
sell their stocks and bonds to buy commodity
investments. If you have some commodities against
your portfolio, youll be able to utilize this
upswing to your advantage.
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