If there’s any word to describe the financial markets in 2010, that word would be “commodities”. All investors are aware of the price of gold that has risen 23% while the GLD, an Exchange Traded Fund that tracks the price of Gold has risen 27.74% as of the end of trading on December 22, 2010. Yet, copper has increased 24.5% and the prices of wheat, corn, and oil have all made significant gains.
Yet, despite the increases, are commodities the right investment for many individual, non-institutional investors, and how do commodity prices affect the green movement and sustainability?
Here are some straight-forward tips and guidelines to profit from the Commodity markets with a better awareness of the risk visit site:
1. DON’T use leveraged ETFs
As we have mentioned before, never use leveraged ETFs for more than one day or your risk a continuous downward spiral leading you to significant losses.
2. Bulls make money, Bears make money, Pigs get slaughtered.
The old axiom is still applicable today. We all remember the go-go 90′s but it seems some of us are forgetting about the credit crisis and the housing bubble. Sure, unemployment is still at 9.3% (not seasonally adjusted) and some people are still not back in the markets. But, some investors are again in the mentality that things can only go up. That is flawed thinking. Don’t make the same mistakes twice. We all remember that Hiller made the same mistake as did Napoleon. Don’t let commodities be your Waterloo. Know when to collect your profits and get out before you lose more than you can afford.
3. You Can’t be Long on Traditional Commodities and an Environmentalist
If your values are more important to you, remember that you are investing in natural gas, oil, frozen orange juice concentrate, cotton, etc. Mining is needed to extract metals and can cause damages to the environment like we see with Massey Energy. And let’s not forget that for green activists, oil is the chief antagonist of them all. BP was a fantastic buy this past summer. And oil is again rising – it closed yesterday above $90 a barrel. If you want to focus your investments in areas that are both green with upside potential, focus on those and leave commodities to someone else.
4. Don’t Limit Yourself to Equities
Never forget that options are on of the best ways to play the commodity markets. Many companies offer bonuses for signing up and work with you to help you understand options trading. Options trading can be a difficult area and you should not rush into it lightly. One recommended platform to use for options trading is Eztrader. You can sign up and create a Free account with any need to deposit funds. They have some great bonuses though if you do fund your account. For example, according to a current promotion, if you deposit $500 they give you $250.
5. Find Funds That Match Your Needs
One possible fund to invest in is The Global Resources Fund (PSPFX), which currently has 33% of its assets in oil exploration stocks and 14% in gold mining. As you can imagine, it has seen growth this year. It’s up 30.96% YTD as of the end of trading yesterday. There are other funds as well that have seen profit.