What to Know About Commodities and How to Invest in Them

Dec 6, 2022 11:41:14 AM

Tom-1-1"What to Know About Commodities and How to Invest in Them" Insights from Vineyard Global Advisors CIO Tom Samuelson, CFA, CMT 

Ivana Pinoauthor atFortuneconnected with Vineyard Global Advisors CIO Tom Samuelson for his expertise in navigating the commodities ecosystem.

Like any other investment or asset class, commodities are not without their benefits and drawbacks. Therefore, investors considering investing in commodities should weigh the pros and cons.

This Article Explores...

What Are Commodities?

Commodities are an asset class comprised of raw materials used to manufacture consumer goods. These investments can help diversify an investor’s mix of assets and spread risk across different asset types. Typically, commodities fall within four main categories: Agricultural, energy, metals, and livestock.

How Do You Invest in Commodities?

Commodities are investible in a few different ways.  First, you can invest directly in the commodity, such as buying a gold bar.  Next, you can purchase a commodity exchange traded fund (ETF) that owns the underlying commodity or financial futures contracts on it.  Finally, you can purchase the common stock of companies involved in the production of commodities, such as buying Chevron common stock to participate in a rise in the price of crude oil.    

The Benefits and Drawbacks of Commodities Investing.

The benefits of commodities investing are short-term profits and hedging against inflation since commodity assets tend to rise during inflation. However, the drawbacks of pursuing commodities are that they are notoriously volatile, only produce income upon selling the asset, and are prone to long periods of price declines.  

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Author: Ivana PinoFortune

Guest Contributor: Tom Samuelson, CIO of Vineyard Global Advisors

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