Commodity trading has a bad reputation for being a risky way to make money. This stats are based on the commodity trading Singapore article written by Martin, a famous Singaporean trader.
And as an investor, does that mean "hands off," or can it still be a good idea in certain situations? We tell you what you need to know to make a good and smart decision.
The first thing: Precious metals like gold and silver, industrial metals like iron and copper, agricultural goods like grain and coffee, and oil and gas are some of the raw materials that are used to make things. Because commodity prices can change a lot, it is true that they can go up and down a lot. The reason for this is that a lot of global and not always predictable things (like natural disasters, new raw materials, and economic booms and crises) have an impact on the market. This could only be seen recently because the price of wood went up so quickly.
However, energy sources and raw materials can help keep your securities portfolio stable if they only make up a small part of it. The reason this is important is that commodities can move in the opposite direction from other types of assets. With gold, for example, you can see this very well. If stock and bond prices fall and investors think the general economy isn't very good, the price of the precious metal usually goes up, which makes it a good thing to have. Because gold is still seen as a "safe haven" in this crisis. However, you should keep in mind that the price of gold changes more than most people think. Fluctuations of 10% a year aren't very rare.
But not only during a crisis can commodities help investors make more money. Gas and oil as well as industrial metals like iron and copper can rise in value when the economy is doing well. This is because the real world uses them in many ways to make and process things.
There are a lot of ways to make money with commodities once you've decided that you want to make money with them. Direct investments in precious metals like gold and silver are very easy to do. You can buy them right away. Coins and bars can be bought from a local dealer or from websites. Gold is great because it doesn't take up a lot of space to store. This means that 5,000 euros in the form of physical gold is smaller than a matchbox and weighs just a little more than a 100-gram piece of gold. In this way, large amounts of money can also be kept in a safe at home or in a bank safe deposit box, where they can be quickly accessed in case of an accident.
Here, however, you should keep in mind that in the event of a break-in, household contents insurance may not cover all of the damage. A safe deposit box at the bank is the same. People can get insurance for the contents of their safe deposit box when they sign a contract with a bank or they can get more insurance for their safe deposit box contents. This is a good time to look more closely at the documents and rules.
Silver is a little more difficult to store. Gold is worth 100 grams if you store 50 times the weight. It's also true that if you wanted to invest in wood or other building materials, you would have to keep huge warehouses full of them. Direct investments, on the other hand, are not a good idea right now. In African countries such as Nigeria and South Africa, many investors still prefer cryptocurrency trading investments.
One option is to buy something called a commodity ETF. Investors buy a mix of different precious and industrial metals, energy stocks, and agricultural goods. You need to know exactly what each bouquet is made up of, and you need to make sure that there is as much diversity as possible. This avoids the risk of clustering. There are no ETFs that focus on a single commodity, and investment funds in Africa have to make sure they have a wide range of stocks.
With stocks and equity funds, you can buy commodities.
With stocks and fund shares, you can indirectly invest in commodities by investing in companies that make or trade commodities. You can do this by investing in companies that make or trade commodities. A company from the energy supply or farming could be one of these. They could also be from mining or forestry. Here, you should keep in mind that the value of your shares can change a lot depending on the state of the world market. For example, if the price of wood goes up, the rate can go up a lot. The same thing goes for losing money. Make sure you have enough time to be able to wait out any downturns in these stocks.
As an investor, you can bet on whether prices will rise or fall through certificates, according to forex experts from xforexonline.co.nz. Make sure you know about the fact that certificates are often equipped with leverage, which means that the price of the certificate is affected by changes in commodity prices more than other types of certificates would be affected. People who buy certificates also have to worry about not getting paid, because certificates are bonds, which means if the issuer doesn't pay, the investor will lose everything. It is very important to note that a certificate doesn't pay interest or dividends, so this is very important. There is no other way to make money than to pay back what you owe. Profits, on the other hand, are directly linked to the performance of the commodity they are linked to.