When you think of investing what typically comes to mind? Stocks. Bonds. What about commodities? A commodity is a raw material or a primary agricultural product that can be bought and sold. Commodities can also be used as a significant way to diversify your portfolio or, if the stock market is bearish, as a temporary shelter for cash. Though the average investor use to avoid commodities due to the excess amount of time, expertise, and money required, there are a number of new routes available that make it easier to invest.


Index Funds

Index Fund investing is considered a form of passive investing. It’s primary strategy’s advantage is the lower management expense ratio. Index funds are considered ideal core portfolio holdings for retirement accounts, such as 401(k) accounts. These types of funds do not require services from research analysts that assist in the stock selection process, giving them an advantage over their actively managed counterparts. This has aided in a notable increase in the asset flows of index fund products and their appeal.


Commodity Companies

Rather than owning the product yourself, you could invest in companies that extract and use raw materials. The fact that without basic materials many products in sectors like technology and consumer goods would not be possible. Commodities like oil, gold, and copper are the foundation for our world making companies like Southern Copper and Anadarko Petroleum top investment candidates. Southern Copper owns one of the largest copper reserves in the world and has the industry’s longest estimated “mine life” at 59 years. The recent rise in the price of copper has made this company a sound commodity stock for investors. Established in 1959, after finding massive quantities of natural gas in the Anadarko Basin, Anadarko Petroleum has become one of the world’s largest oil and gas exploration and production companies. Insiders believe this company is one of the best commodity stocks for investors to consider proven by the recent escalation of insider buying by multiple members.


Follow Trends

In this type of investing, it is actually useful to follow trends. The goal is to decrease the potential for deep drawdowns. The strategy goes by the adage that one should cut losses short and allow winners to run. Commodities do have a cyclical nature; however, investors can use this to their advantage. With an understanding of the particular product, the investor should buy in as there is forward momentum and then aim to get out as it declines.