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One way of investing your money is by buying commodities. As commodities go up over time the investors are able to benefit.
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? Basically there are three different ways to invest in commodities.
1. Buy them
The simpliest way to invest in a commodity is to go out and buy it. For example if you believe the price of silver is going to go up you could always buy some silver and sell it when the price gets higher. This does come with a few big problems however..
2. Buy Futures
One other more effective way of doing this is to buy silver future contracts. By buying futures you are buying a lot of silver, only the delivery date may be many months into the future. So while you would not actually own any silver you would own the contract giving you control of silver at some point in the future.
As silver increases so does the price of the future contract you own. If you do not wish to obtain the silver you could always sell the futures contract before it comes due.
3. Buy ETFs
Another method is to buy an ETF. Commodity ETFs will either hold the commodity themselves or invest into companies that produce that commodity. As the demand and value of the commodity goes up it will be reflected in the price of the ETF.
So instead of buying a futures contract or buying the actual commodity an investor can simply buy an ETF and hold onto it for the long term.
