One overlooked investment vehicle is the commodity market. This allows an investor to make money as the price of commodities goes up over time.
But what is a commodity? A commodity is something that has a demand, usually has a limited supply and is sold through multiple different companies. So, gold, water, corn, and livestock would all be considered commodities.
Now that you have a basic understanding of what a commodity is, we can look at how do I invest in commodities? There are basically three different methods you could use to invest into the commodity market.
1. Buy them
The simpliest way to invest in a commodity is to go out and buy it. So for instance if you think that the price of silver is going up you can go out and buy a bunch of items made out of silver and store them in your garage.
2. Buy Futures
A much more realistic approach is by simply buying silver futures. By buying futures you are buying a lot of silver, only the delivery date may be many months into the future. So, you do not actually own silver, but you do hold a contract to recieve it in the future.
As the price of silver increases the price of the contract that you hold will most likely increase as well. If you do not wish to obtain the silver you could always sell the futures contract before it comes due.
3. Buy ETFs
One other strategy would be to buy an ETF. Commodity ETFs either invest into companies producing the commodity or the ETF will hold the commodity itself. As the demand and value of the commodity goes up it will be reflected in the price of the ETF.
So if you were going to buy silver you could simply buy a silver ETF like SLV and benefit as the price goes up without having a specific date which you would own the commodity if you do not get out.
