Investing in Commodities

Investing in commodities can be done in a number of ways like …

Investing in companies that produce commodities
Many investors already hold shares in such companies or hold units in collective investment schemes such as unit trusts which invest all or part of the fund assets into such companies

Buying or selling commodities on the ‘spot market’ for immediate delivery.
This involves high transaction costs and is not a suitable method of investment for individual investors

Buying or selling thru commodities exchanges for later delivery.
Most trading in commodities is done through ‘futures’ and ‘options’. Taking positions in individual commodities is essentially speculative and should only be undertaken by professional investors who can afford to lose large sums of money if things go wrong.

It seems an obvious statement but commodities make a return for investors if prices rise after purchase. They generate losses if prices fall. Unlike financial assets, commodities offer no gain from interest income or dividends.