If you want to invest in commodities, you should invest in a commodity index.
Just like other indexes, commodity indexes track the performance of a basket of commodities. Zinc, gold, silver etc So you can see, these indexes track a variety of commodities.
The most popular commodity index is the Goldman Sachs Commodity Index (GSCI). GSCI tracks the performance of 24 commodity futures contracts. Another popular commodity index is the Reuters/Jefferies Commodity Research Bureau Index (CRB).
Now CRB is an important commodity index and it is widely followed by hedge funds, institutional investors, retail investors and economists as a commodity benchmark. This ensures that no commodity dominates DG-AIGCI.
Rogers Commodities Index (RCI) has a grand list of 35 commodities and tracks the most commodities amongst the different commodity indexes. Deutsche Bank Liquidity Commodity Index (DBLCI) is the newest kid. There are many ways to invest in these commodity indexes.
Now how to do commodity investing. Then you can also trade futures contracts on individual commodities like gold, silver, crude oil, coffee, copper and stuff like that.
Another method is to invest in commodity mutual funds that track these indexes.
How to Trade Commodities - What Are Commodities?
For amateur investors, though, the commodity market can be daunting: while the workings of the stock market are known at least in part by most laymen, the commodity market is less understood. For the beginner wanting to learn how to trade commodities, knowledge of the basic aspects of commodities and the commodity market is essential.
Commodities are basic traded goods with a number of common properties. Since commodities have agreed standards which are verified by officials in the particular commodity exchanges, the commodities can be quickly and efficiently sold and transferred. Other farmed goods that are traded fall into a different class: livestock and meat commodities. It is strongly advised that anyone wishing to trade in commodities researches thoroughly first.
Commodity Investing - Flaws of Buying Shares in Commodity-Related Firms
To add on, commodity-related firms sometimes cannot profit when government policies can increase commodity prices. Besides all these, scandals for these companies can cause stock prices to plummet while commodity prices rise. Furthermore, commodity-related firms can fake their balance sheets and report higher earnings to jack up their stock prices. At the same time, commodity prices can rise as war can increase demand for commodities and decrease the supply available. If this occurs, the investor once again loses out instead of profiting from the rising prices of commodities.