What kind of investor are you? Are you the buy-high-sell-higher (trend continuation) type? Or are you a bargain hunter who likes beaten-down (trend reversal) opportunities?
The former type of investor is now in heaven. With the stock market at new highs, there are many stocks on fire.
But if you’re looking for bargains, the pickings are pretty slim.
Don’t worry. There are still many places to invest your money. I'm talking about hard assets, aka commodities.
Why invest in commodities now?
Hard assets go well beyond real estate and gold. They include all types of natural resources like oil, wheat, copper, timber, coffee, zinc, and pork bellies.
Investors often overlook natural resources. But this asset class has been beaten down and should be at the top of every bargain hunter’s list.
You should consider commodities for two reasons:
- Commodities don’t usually move in sync with the stock market, so they will help diversify your investment mix and reduce risk. Since 2000, there has been only a 35% correlation between commodities and the stock market.
- If you buy at the right time, you can make a mountain of money in commodities.
Take a look at Hilary Clinton. In the 1970s, she opened a commodity trading account with a company called Refco and seeded it with $1,000. Mrs. Clinton turned that $1,000 into over $100,000 in just 10 months. That’s a whopping 9,000% return.
The Wall Street Journal stated, “Over 10 months, buying and selling futures contracts in a variety of commodities, especially cattle, Mrs. Clinton after various ups and downs had made nearly $100,000, and in July 1979 got out of the market.”
Hillary should have kept trading. At that pace, she would have made $700 million in three years and a couple trillion in 10 years.
My point is that investing in commodities can be very rewarding. And given the low prices that many natural resources are trading at right now, you should think about adding them to your portfolio.
The best way to invest in commodities
There are many ways to invest in commodities (including futures like Mrs. Clinton). But, the best way for most investors is via exchange-traded funds.
Name (Ticker) Commodity
- PowerShares DB Commodity Index Tracking Fund DBC All
- United States Oil Fund USO Energy
- iPath Bloomberg Commodity Index Total Return ETN DJP All
- iShares S&P GSCI Commodity-Indexed Trust ETF GSG All
- PowerShares DB Agriculture Fund DBA Food
- United States Commodity Index Fund USCI All
- United States Natural Gas Fund UNG Energy
- iPath Bloomberg Grains Subindex Total Return ETN JJG Food
- iPath Bloomberg Sugar Subindex Total Return ETN SGG Food
- The Teucrium Wheat Fund WEAT Food
- iPath Bloomberg Copper Subindex Total Return ETN JJC Metals
- iPath Bloomberg Cocoa Subindex Total Return ETN NIB Food
- The Teucrium Soybean Fund SOYB Food
- iPath Bloomberg Livestock Subindex Total ReturnSM ETN COW Food
- iPath Bloomberg Nickel Subindex Total Return ETN JJN Metals
- The Teucrium Sugar Fund CANE Food
- iPath Bloomberg Industrial Metals Subindex Total Return ETN JJM Metals
- United States Diesel Heating Oil Fund UHN Energy
- United States Copper Index Fund CPER Metals
- iPath Bloomberg Aluminum Subindex Total Return ETN JJU Metals
- iPath Pure Beta Cotton ETN CTNN Food
- iPath Pure Beta Nickel ETN NINI Metals
- iPath Pure Beta Grains ETN WEET Food
- PowerShares DB Oil Fund DBO Energy
- PowerShares DB Base Metals Fund DBB Metals
- iPath Bloomberg Coffee Subindex Total Return ETN JO Food
- PowerShares DB Energy Fund DBE Energy
- The Teucrium Corn Fund CORN Food
Two ETFs that track a broad basket of commodities are the PowerShares DB Commodity Index Tracking Fund (DBC) and the iShares S&P GSCI Commodity-Indexed Trust (GSG).
If you prefer a more concentrated strategy, you won’t have any problems finding ETFs for specific niches—from coffee to copper, to corn.
As always, timing is everything, so any bargain hunter worth his salt should be watching natural resources and commodities. This is especially true if you think that ZIRP, NIRP, and QE will result in the wild return of inflation.
Tony Sagami has worked in almost every part of the financial services industry, including a stint as a life insurance salesman for Prudential; a stockbroker at Merrill Lynch; and a portfolio manager at The Donohue Group. Later he switched to publishing and eventually became one of the most widely read market writers of the last generation. Click HERE to learn how Tony uncovers the real story behind the week’s market news. To read more of his articles, GO HERE NOW.
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