Agricultural Commodities In 2012 – Volatile Outlook?
“As everything from energy to metals to agriculture continues to inflate in an almost bubble-like manner in the midst of very unstable domestic and global economic climates, many market players are beginning to wonder what the future holds for commodity prices across the board.
Factor in the possibility of some 2012 weather challenges from Mother Nature, and the bigger picture becomes even more convoluted for even veteran commodity investors.
Finding a sense of market direction among the real, somewhat ominous, bigger picture with all of its countless moving parts is sometimes hard to digest.”
Full Story – Forbes.com
As a person who has never invested in the commodity markets, it seems to be common sense that we are always at mother natures mercy, when it comes to certain commodities.
I’m a believer in investing through mutual funds, allowing for diversity and long term growth. I feel the same type of investing should be done with commodities.
The systematic investing every month helps to slowly build your portfolio without the worry of up and down markets.
As stated by Alan Lammey and Joseph D’Aleo, “Other than going with strictly individual company stocks in the agriculture niche, there are also some popular Exchange Traded Funds that offer investors exposure to ‘baskets of commodities’ in each fund, which is not so dissimilar to the diversification concept of a mutual fund.
These ETF’s include: S&P GSCI Commodity Index (GSG), Powershares DB Commodity Index (DBC), Dow Jones Commodity Index (DJP), and Rogers International Commodity (RJI).”
So just starting out with commodity investing, I’d be most comfortable investing with ‘baskets of commodities’.
With mutual funds if you invest $100 a month you’ll be buying small shares of stock spread out through multiple companies.
When the market is down you’ll be purchasing more shares and when up, less shares.
If 10 companies are in the mutual fund and 3 are down, but 7 are up, then great, but the reverse could happen as well.
That’s why investing for the long haul with mutual funds is best. Over time you will see more consistent gains then losses.
As with anything, be diverse in your investments and don’t keep all your eggs in one basket.