As hot as the stock market has been lately, investing in some commodities has produced far better returns this year. The prices of cotton and copper, for example, have risen more than 30 percent, better than the Dow’s 18 percent rise.
Overall, commodity prices are lagging behind stocks with the Dow Jones-AIG Commodity Futures Index, a measure of the prices of 20 commodities, up 13.5 percent for the year. But the commodities index has been up for two of the past three years while the Dow is coming off three losing years.
Professional investors use commodities to provide a cushion against stock-market drops. But for individuals, investing in commodities can be a risky strategy. One of the most common techniques involves borrowing heavily to buy a future shipment of a commodity, like pork bellies. If you guess wrong — and the price is different from expectations — you end up owing more money than you put in initially.
This is also an expensive time to get into the market, with so many commodity prices up sharply this year.
John Elliott, an engineer from Las Vegas, has been investing in commodities for about 20 years. Mr. Elliott says he's made a small profit over the long run trading options and futures pegged to currencies, interest rates, and commodities like grains and livestock. "But most people don't realize, you spend a lot more time keeping up with this sort of investment than you do with stock trades," he says.
Still, many investment experts recommend that individuals keep 5 percent to 10 percent of their portfolios in commodities. That's because when stocks are sinking, commodities like gold or oil — both of which thrive in rocky economies — are often climbing. Last year, for example, gold prices rose 25 percent while stocks tumbled.
Because of the potential for big losses, investing in commodities is most commonly done by high-net-worth individuals with seven-figure portfolios. But there are a variety of tactics, from investing in mutual funds that specialize in commodities to buying gold outright, that are better suited to conservative investors or those with smaller sums. Here's a rundown of different approaches.
• Funds — The simplest way to own commodities is to own a broad-based commodity fund like the Rogers Raw Material Fund or the Price Fund. Both invest directly in baskets of commodities, have minimum investments of $5,000 to $10,000, and are regulated by the Securities and Exchange Commission and Commodity Futures Trading Commission.
There are also traditional mutual funds focused on shares of commodity-producing companies. Fidelity Investments, for example, offers the Select Portfolios family of funds: It has separate funds for agriculture, gold, natural gas, and utilities and numerous other commodities.
Investors who want more information on commodity funds can find rankings and other information www.barclaygrp.com. The industry group Managed Funds Association also is useful, at www.mfainfo.org.
O Clubeinvest.com informa que nenhuma da informação
aqui facultada deverá ser entendida como conselho ou recomendação
de qualquer tipo de transacção ou investimento.
