Commodities Rising: The Reality Behind the Hype and How To Really Profit in the Commodities Market

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Commodity Investment Vehicles

Having decided to invest in commodities-oriented assets, the investor must then determine how he wishes to buy this exposure. There are many approaches providing various degrees of exposure and leverage, both directly investing in commodities and indirectly buying exposure to commodities prices through the stocks of commodities-producing companies, special investment vehicles, and commodities-oriented investment funds. One can purchase physical commodities, futures contracts traded on organized exchanges, and forward contracts that look like futures but are not traded on exchanges. There are also options, both simple puts and calls, and compound options strategies. There are the equities and equity options of commodities-producing, processing, and consuming companies. There are natural resource and precious metals mutual funds, hedge funds, and other funds. There are commodities funds and commodities pools. And then there is a growing pool of commodities-linked investment vehicles such as indexed accounts, indexed notes and bonds, structured investment products, and exchange traded funds.

Each of these investment vehicles has advantages and disadvantages compared to others. Some offer more leverage, some offer more protection against adverse price moves. Different investors are attracted to various investment instruments based on who they are and what they want. Some prefer futures because of the enormous leverage that futures provide them. You often ...