If you want to expand your investment portfolio to include physical assets, such as physical precious metals offered by reputable coin dealers in Sydney NSW, consider investing in commodities. Whether it’s gold or wheat, commodities offer diversification and protection against inflation. If you understand the basics of commodity investing, you’ll be on the right track to expanding your investment portfolio.
What are commodities, and why invest in them?
Commodities can be considered the building blocks of an economy, providing raw materials for goods and services necessary for a nation to function. Some examples include crude oil, gold, soybeans, and live cattle. For most investors, it’s one of the best ways to achieve financial independence because the assets often behave the opposite from stocks and bonds. When the stock market becomes unstable, for example, there’s a good chance that the price of commodities will go up.
- Serves as protection against inflation
- Helps preserve your buying power
- Helps minimise potential losses across your investment portfolio
- Physical assets tend to be more secure when market downturns happen
- Provides opportunities for long-term investment growth, especially with high-demand commodities
Energy and food are just two of the commodities you can invest in. Considering that almost everyone is dependent on gasoline and livestock, investing in commodities is definitely a good option.
The Many Ways to Invest in Commodities in Australia
Physical Ownership
This is where you invest in gold or silver bars, coins, and bullion.
- Best for diversifying into precious metals
- Recommended for long-term holders
- May incur insurance storage fees
Commodity ETFs (Exchange-Traded Funds)
Commodity-based ETFs are exchange-traded funds invested in agricultural products, precious metals, and other commodities. ETFs can be equity funds, physically backed funds, futures-based, and exchange-traded notes.
- Investments go through a brokerage account
- This simplifies the process of buying and selling, making it more efficient
- Trading a group of commodities is less risky than individual futures contracts
- No physical goods to store, eliminating the need for storage fees
Futures and Options
Futures and options are two types of financial derivatives, where the values are derived from an underlying asset such as a commodity or a stock. If you invest in futures, you’re obligated to buy or sell an asset at a set date and price in the future. Options, on the other hand, give you the option to buy or sell an asset, but you’re not obligated to do so.
- Riskier than other commodities, but the rewards are higher
- Buy and sell happen in specialist trading platforms
- Investors must be knowledgeable and experienced in the market
Managed Funds or Superannuation Options
Some managed and super funds may include commodities as part of a broader investment strategy.
- Recommended for passive investors
- An investment expert manages the funds
Choosing the Right Commodity for You
- Determine if your goal is short-term or long-term profit
- Assess your risk and volatility tolerance and go from there
- If you’re a beginner, start with something simpler and safer, like physical metals or ETFs
- Ask yourself if you’re interested in tangible, digital, or paper investments
With the right commodity and a carefully made investing plan, you have room for diversification, allowing you to protect your wealth and work towards your long-term goals. If you want to start your commodity exposure with gold and silver coins, Jaggards is a reliable source.
