Top 5 Reasons You Should Invest In Commodities

1) Commodities are a way to diversify your portfolio and can also act as a hedge as they tend to bear a low to negative correlation to stocks and bonds. So, if stocks and bonds have to go down, commodities have a very strong chance of attracting the money that comes out of those asset classes which in turn benefits the prices of commodities. Consider investing in commodities as a means to reduce volatility and boost returns.



Source: “Commodities as an Asset Class”, Frank Armstrong III, CFP®

2) Most commodities except gold are priced based on supply and demand. As the economies of BRIC (Brazil, Russia, India, and China) countries continue to grow at much faster rates than those of the more developed nations as such as the United States, most European countries, Canada and Australia, the demand for commodities will continue to be robust and this translates into good news if you are invested in commodities.

3) While money can be printed cheaply and easily by Central Banks around the world, commodities on the other hand, need to be grown or mined which is not as easy. It can take years to start up a new mine or a few months to grow a new batch of crops so I can say that commodity production elasticity is low.

4) As geopolitical tensions grow in countries like Iran, Venezuela, Nigeria, Iraq and many other commodity producing nations, prices of commodities will benefit.

5) We are currently in a commodities bull market and will continue to be for some time. The reason being that it takes a long while for supply/ demand discrepancies to correct themselves. Take for example uranium, current uranium mine production only supplies 59% of annual consumption and the new energy demand for uranium is growing at 4 times the rate of new mineable supply so essentially this supply/demand discrepancy is only going to become wider.