Can you invest in commodities directly?

Commodity trading goes back centuries, even before stocks and bonds exchanged hands. Commodity-hungry investors can consider investing directly in the physical commodity, or indirectly by purchasing shares in commodity companies, mutual funds, or exchange traded funds (ETFs).

How do you buy physical commodities?

There are five basic ways to invest in commodities:

1. » Invest in commodities through ETFs.
2. » Invest in commodities through mutual funds.
3. » Invest in commodities through options.
4. » Invest in commodities through futures.
5. » Invest directly in physical commodity.

How do I start investing in commodities?

How to Open a Commodity Account

1. The first step towards investing in the commodity market in India is opening an account with a exchange registered broker.
2. The next step is to fill the account opening form with the commodity broker.

How are commodities purchased?

There are three ways to own commodities: own the physical commodity itself, buy futures contracts, or buy through a mutual fund or ETF. However, for most investors, the best way to get exposure to commodities is through a mutual fund or ETF.

When should you buy commodities?

The best time to buy commodities is typically when they are cheap and priced at or near the cost of production. Some investors also trade commodities when they’re hitting multi-year highs, but that sort of trend trading exposes investors to the risk of buying the top before a major crash.

How do commodities investments work?

There are several ways to consider investing in commodities. One is to purchase varying amounts of physical raw commodities, such as precious metal bullion. Investors can also invest through the use of futures contracts or exchange-traded products (ETPs) that directly track a specific commodity index.

Do I need commodities in my portfolio?

Investing some of your portfolio in commodities is recommended by many experts as it is seen as a diversifier asset class. Moreover, some commodities tend to be a good hedge against inflation, such as precious metals and energy products.