Commodity Investments have become one of the hottest ways to make money. Thanks to the ease of trading and the availability of financial apps, you can make investments virtually and watch your income grow. Commodity investments have become lucrative as they provide access to holding physical Earth minerals with real value and long-term availability.
In today’s time however, trading commodities has become even more attractive because of rising inflation and weakening currencies. Issues like the Russo-Ukrainian war have caused higher interest rates and inflation globally. Considering such tough times, the world is in the midst of a global recession which makes commodity trading almost essential.
Therefore, in this article, we’ve made findings on top commodities for putting your money to work for you. By the end of this blog, you’ll be able to make a better buying decision to build a financial safety net around yourself. But first, here’s a little run down on what commodities are.
Commodities are essential goods that are uniform in quality and unity. These characteristics remain the same regardless of their origin. For example, when buying jewelry, you don’t consider where a precious stone was mined. This quality results in many items being categorized as commodities, however, investors take a different approach.
From a financial standpoint, commodities are a class of minerals in demand globally and are normally divided into two categories – hard and soft.
Hard commodities are items that need to be mined and drilled for. These include metals like gold, aluminum, and copper. Energy products like natural gas, crude oil and unleaded gasoline also fall into this category. Conversely, soft commodities are goods that are grown, e.g., soybeans, corn, wheat and cattle.
As you might already know, inflation is a general rise in prices without coordination. It’s an economically crippling system which commodities can safeguard your business from. This protection is possible because commodity prices rise as inflation rises.
According to the latest report from the Bureau of Labor Statistics, the annual inflation rate in 44 major countries worldwide was 8.6% in May, its highest level since 1981, as measured by the consumer price index
As demand for goods and services increases, so do their prices. The cost of materials for producing these goods and services also goes up to match the inflation acceleration.
Beyond this explanation, commodities act as a hedge in the following ways;
Let’s get down to business. Inflation is in full swing, and you need intelligent investments. For that, we have compiled a list of the top commodities to put your money into;
Gold is the world’s most sought-after commodity and has been for more than 5,000 years. It’s been used as a currency, a store of value and a hedge against inflation. Why? Because gold has always held its value over time. That’s why when other investments are losing their value — like stocks or real estate — you can count on gold to protect and build your wealth.
In other words, no investment or item can come close to gold's mega, long-term track record. Throughout history, gold has always maintained its purchasing power, and value globally.
"In spite of gold's volatility in the short term, its long-term value has always remained & stable."
The value of gold always increases as the prices go up. Investors benefit immensely from this commodity advantage and channel their investments into this time-tested asset. Gold is also a lucrative investment commodity because of its indirect relationship with the dollar.
But how should you invest in Gold? That's a Golden question (no pun intended).
With ISA Bullion’s Gold trading platform, you can invest in the gold market from anywhere in the world, instantly via our mobile app. We facilitate real-time gold trades with seamless executions on the go while offering physical possession of gold, insurance and vaulting services for you.
Download the ISA Bullion App for iOS or android now.
Next to gold, silver is a premium safe harbor investment. It’s one of the most traded metals on the market. It has been used extensively by humans for thousands of years and is an essential material for industries worldwide.
Silver jewelry is also one of the hottest trends in fashion, while silverware finds itself at the dining table in posh restaurants throughout the world. In addition to its use in industry and as a precious metal commodity, silver also plays a vital role in energy generation, medicine, electronics and photography.
Investing in silver is an excellent option, thanks to its uniqueness as a precious metal as well as industrial. To benefit from silver investments, you can begin trading it directly from the ISA Bullion trading App now.
Shockingly, lithium shares similar demand levels with gold and silver. It’s not a precious metal, but it’s become a necessary component for various technological advancements. These range from smartphones to electric cars. Global output for this year is expected to exceed demand to 650,000 tonnes on its way to 1.47 million tonnes in 2027.
With this money-making potential, you can invest in lithium using securities and ETFs. These options grant access to a commodity on track to become an industry giant.
Copper production is expected to increase by 4.3% this year with a price target of $10,100.
Copper gives you an excellent hedge against inflation directly and indirectly. In the former case, you can hold the commodity in its physical form with options including copper coins, bullion bars and futures. Indirect investments mean you’ll have it as copper ETFs, copper miner stocks or copper mutual funds.
There are numerous reasons to invest in aluminum. Its current value projection is $2126/t with a long term projection of $2,276/t by 2026. Either way, you have multiple options to invest in, with aluminum stock investment a safe place to start. For example, you may begin by investing in mining stocks or stocks of aluminum producers like China.
Suppose that doesn’t interest you; trade aluminum ETFs. These have an excellent return and carry less risk than aluminum futures.
Oil is a quality asset to put your money into. Global demand for 2022 has been reduced to 1.7mb/d but there’s an expected increase of 2.1bd/d in 2023. You can gain directly by purchasing options contracts or futures. For secure alternatives, you can use mutual funds and ETFs, which are simple and safe.
For indirect investment, buy stock in individual oil companies. These can be either upstream, midstream or downstream companies. You can also buy shares of a mutual fund.
Thanks to necessity and availability, gas is currently a mainstream commodity. Gas investments are expected to rise from $131 billion to $171 billion in 2024. The financial markets have also created multiple ways to invest in gas. First, you can invest in natural gas ETFs. These can be natural gas company ETFs or Natural gas price ETFs. It's a perfect option for investment newbies as it has less risk and no complications.
You can also buy MLP stocks. Master Limited partnerships come with tax benefits for profits. In practice, earnings are only taxed when distributed to general and limited company partners.
Coal is prone to a steady 10% investment increase with another 10% this year. Like other fossil fuels, you can invest in coal commodities using futures. The coal futures contract operates using a unique system where commercial users can hedge against market risk. With this opportunity, market speculators can profit based on the commodities' value over time.
An alternative is to invest in a company that already mines coal. It would help if you went with a company with multiple coal reserves that operate in different locations. Considering this, there are three companies you can go with, i.e., BHP Group, Rio Tinto and Glencore.
In the wake of the pandemic, many items have become scarce. One of the items that have been hard hit with shortages has been the microchips used in automobile production, globally. As a result, major automobile manufacturers have had to decrease their steel spending or stop it altogether. But manufacturing less cars can not be the solution.
Therefore, steel is slated to be an exceptional investment in 2022. The reason? There is a high probability that steel prices will rise in the second half of 2022 due to the increased supply of microchips. With more microchips, more steel will be poured back into the auto industry, increasing its rarity and price.
Agricultural investments mean giving financial backing to food production, processing and distribution. According to the world bank, prices are expected to increase by 20% this year. It could also go higher with a prolonged Russian war and further sanctions on the country.
There are multiple ways to achieve this ranging from agricultural ETFs to farm REITs. The ETFs grant diversified exposure to the agriculture sector. You can start with the VanEck Agribusiness ETF. It allows investors to invest capital in companies that derive at least 50% of revenue from agriculture.
Also, you can buy stocks in companies that support the agriculture industry. These corporations can be farm equipment manufacturers, crop distributors or fertilizers sellers. Agricultural mutual funds that invest in agriculture and farming industries are another option. You must confirm if the funds are invested in agriculture-linked firms or commodities.
Commodity investment happens in different ways depending on the commodity or sector. Given what we’ve discussed, here’s a better understanding of investment options;
This investment system requires you to hold unto the biological raw material. You can sell these and get back your initial investment. Alternatively, you can hold unto the item and sell it for a higher price.
Online investments are an easy process for beginners and experienced investors. Interested parties can make financial decisions with access to global financial markets on the go from their mobile devices.
Furthermore, investors can trade their commodity in real time by applying measures like: limiting, stop and take-profit orders etc., directly from the app.
For instance, you can download the ISA Bullion app and begin trading gold and silver instantly at your fingertips. When you purchase Gold or Silver from us, we store it for you in our secure vaults. We also offer the facility of delivering you physical Gold and silver on special request.
Getting started on the ISA Bullion platform is super easy. You can download the app directly from here now.
Buying company stocks offers two significant benefits. First, company profit rises as commodity price rises. Also, the miner can increase production, increasing profit in the long run. You still must understand that the commodity industry is volatile and capital intensive.
Your company of choice must also have a solid business model and profit. With these fundamentals in check, you can be rest assured that the company won’t go bankrupt or use your investment unwisely.
This investment depends mainly on probability. As an investor, you get into an agreement with a second investor based on the commodity's future price. You can use future contracts which sell commodities in the future for a predetermined price.
The futures market is not recommended for first-timers, given its speculative nature. Instead, it’s made up of institutional producers and consumers.
Commodity investment has advantages, but there are still some dangers to this financial opportunity. These include;
Investment in commodities is all about getting the right advice and directives. We’ve done our research and developed these tips for investing the right way;
The truth about the investment is it’s a volatile one. Depending on the global financial situation, things can go up and down quickly. Before throwing your lot in, you need a clear understanding of what you’re trying to achieve.
Safety should be a priority in this case. A secure investment is impossible, but you can get a similar arrangement. Government-issued certificates are a durable option as they are one of the few US bonds operating with the gold standard. You can also go for AAA-rated corporate bonds from large, stable companies.
The next objective is income. Choose an investment option that’s in line with your targets. For instance, most retirees for government and corporate bonds have a steady income and less risk. Alternatively, you can choose short-term CDs beyond the stable AAA-rated options. If you’re looking for a more controlled situation, purchase preferred common stocks. These have a history of paying good dividends, so there’s every possibility of stable earnings.
Your final objective is capital growth. This increase is achieved by selling a capital asset for financial gain. Choose what capital growth asset works best from the numerous options. Blue-chip stocks are the safest choice with long-term growth potential. But, you can also choose growth stocks that might require weathering some financial storms.
Since you’re just starting, financial monitoring is mandatory. This process guarantees you can make the necessary adjustments depending on the market situation. You can use online tracking services to monitor your portfolio. That said, you’ll have to know what kind of fees are expected and the required investment amount.
You can also monitor financial progress with personal finance apps. Tools like count about and stock rover come with analytics features for studying the market. Also, you can use the app to calculate your monthly expenses and potential passive income. This information lets you review finances and make better plans.
If you're feeling proactive, you can track the investments by yourself. Tools like Google Sheets and Excel can help you get this done. It’s back-breaking work, but you can adjust it anyhow you wish.
Diversify Your Investment Portfolio
Your investment range should go beyond stocks. It should include real estate investment trusts, commodities and exchange-traded funds. Fixed income funds can also be added to the mix for long-term diversification.
Commodities have an excellent investment potential and can protect you from inflation. With this article, we hope you will be able to use any of our top picks and build a hedge against financial uncertainty. For more information regarding tradable commodities, contact our team at ISA Bullion.