The basics for commodity investment

Like equities commodity Investment too trade in organized format in predetermined market losing the cash and derivative market. Expiry and delivery date are well determined. Quality control mechanism are already in place for consistency of size and quality of delivered goods.

Skill sets require for commodity investment

In case of equities, you need to learn business fundamentals, financial engineering, balance sheets etc.. In case of commodities, you need to learn seasons, geography, mining sources and consumption trends. Commodity data are available freely in public domain. In commodity domain calculated and informed trades tend to yield higher return. Since commodity prices move in a narrower range, commodity brokers encourage you to invest more for higher profits. Commodity Option trading is much less risky than stock market trading.

Risk in Commodity Investment

Equity are any day more volatile than commodities. Stocks can go from zero to hundred and back again to zero. Commodities being items of daily consumption are sensitive to price volatility. High commodity prices have impact on consumer price index, inflation. Trends in commodities last longer as compared with equities due to basic nature of product cycle. The basic trend reverse after longer time spans. This is because everyday you can not find on mine, you can not really double your agricultural land etc.. Equities can change trend any time. Few manipulator can not really change the trend over night.

High returns from commodity market

Absolute returns available to traders with a buy and hold strategy have been 123% in 23 months,50% in crude in 14 months, 60% in gold in 24 months and155% in silver in 30 months. Capital is leveraged 20 times. Commodity has fantastic return of investment. Risk in commodity market is much less than stock market.

Why Commodities are more profitable than stocks?

You better be bullish on commodities—the real world goods every business needs to operate. Business house requires copper, aluminum, sugar, corn, gold, silver, cotton, oil, nickel, soybeans… the list goes on and on.

Since 2001, most of these things have skyrocketed in price:

Aluminum shot up 94% Gold, 124% Silver, 142% Platinum, 159% Lead, 252% Copper, 280% Crude Oil, 300% Nickel, 302% Gasoline, up as much as 578% Natural Gas, up as much as 807% Sugar is up about 61%

Why is this happening? Two reasons.

First, commodities were in a major bear market from the 1980s to the late 1990s.

Second, Asian economy mainly China and India. These two countries not only building their country but they also feed around 2.4 billion people.

The “No-Risk” way to play commodity Investment

Despite some big rises in the price of raw materials, I don’t think it’s too late to get in. I actually think we’re still in the (somewhat) early stages of a great commodity bull market. People typically “play” commodities through futures contracts or commodity-related stocks. With futures contracts, you can make a ton of money (since you’re using leverage). But you can quickly and easily lose a ton too. It is better to invest in some commodity index fund like DJ AIG Commodity Index.

Secret to Money Code using Commodity Investment

I personally advocate to be a long term passive stock investor. However, there are time to earn super natural return.You need to identify those buy points. Invest money for short duration for huge profit. You should read the books by larry williams or Jim Rogers. Larry is famous traders in stock and commodity market.

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Return from Commodity Investment to Financial Planning for Retirement