Prairie Yarns Investment

Good to know if you want to start investing: Invest Tips

The benefits of investing in commodities

The benefits of investing in commodities

I’m sure you’ll hear it from time to time: oil prices have risen or fallen again. For investors, this is important information, because it partly determines the prices on the stock exchange. This certainly applies when you invest in commodities yourself. In this article we tell you why it can be interesting to invest in commodities.

Why should you invest in commodities?

Commodities may not be as popular as shares or bonds, but still it can be a good idea to include commodities in your investment portfolio. Why? Below are a number of reasons to invest in commodities.

Commodities are scarce

An important aspect of raw materials is that stocks are limited. This means that their price is determined by the interaction between supply and demand.

It can happen that certain raw materials are overproduced, causing the available stock to increase and the prices of these raw materials to fall. But when demand exceeds supply, scarcity occurs and you usually see a trend with rising prices as a result.

Rising demand

Certain raw materials are in great demand in emerging economies. Take, for example, the economic growth that China has experienced in recent decades. The demand for raw materials has been enormous there. It is not inconceivable that Africa will also experience substantial growth in the coming years. Circumstances such as these can make raw materials an interesting investment.

Good spread

It is a good idea to spread your investment across different investment categories. By not only investing in shares and bonds, but also in commodities, you spread the risks you run. Read more about limiting risks.

Risks of investing in commodities

Of course there are risks associated with investing in commodities. Commodities can be volatile. This means that the value of your investments can fluctuate. Always keep in mind that your investments may become worth less. Read more about the risks of investing.

Which commodities can you invest in?

Gold and oil are by far the most popular commodities among investors. But of course there are many other commodities in which you can invest. Think of iron, copper and gas. But also agricultural products such as cocoa, coffee and corn, or chemicals such as uranium and lithium.

How can you invest in commodities?

If you want to invest in commodities, there are a number of options. For example, you can invest in companies that mine raw materials or process them into semi-finished products.

You can also gain access to the commodities market through ETFs. These are investment products with which you can invest in different commodities or in different companies active in the commodities market all at once. You can see ETFs as a kind of investment basket.

Don’t have a lot of experience with investing yet? Then read our handy step-by-step plan on how to start investing.

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