How to Begin Investing in Commodities

Investing in commodities can provide you with a way to diversify your portfolio, and earn money, without depending on what the stock market does. Investing in commodities will provide you with the ability to speculate on the price of things like wheat, corn or soybeans. There are several methods that you could use to invest in the commodities market. Here are the basics of how to begin investing in commodities.

Funds

One of the easiest ways to get involved in commodity investing is to invest in ETF's or mutual funds. There are several funds that make money by investing in commodities. In order to get involved with these funds, you will need to buy or sell shares through your normal brokerage account. Many people prefer this method because they do not have to open a special account. They can simply choose a fund, and then invest in it.

One of the major advantages of investing in funds is that you have a fund manager that makes all of the tough investment decisions for you. They will choose what types of contracts to buy and sell and you will get to profit from it. This method also provides you with diversification. As an individual investor, you may not have enough assets to diversify your commodities investing sufficiently. With a fund, you are pooling your money together with many other investors to buy several securities.

Find a Commodities Broker

Another way that you can invest in commodities is to get involved with futures contracts. In order to do this, you will need to work with a commodities broker that specializes in futures. The first thing that you need to do is locate a broker that is reputable in the industry. While there are hundreds of commodities brokers out there, you need to do some homework and find out which ones are the best for traders. Check with the National Futures Association to find out information about a broker before signing up with them. Once you locate a broker, you will need to open an account with them. This can be done by completing a basic account application from their website.

Fund Your Account

Once your account is open, you will need to fund it before you can start trading. You can typically fund your account with a wire transfer, cash, check or with a credit card. Each broker is a little different and they will each have their own funding methods and requirements. Once the money clears your account, you can begin trading.

Trading Commodities

After your account is funded and ready to trade, you can typically trade from the convenience of your own computer. You will have an online trading platform that you can download from your commodities broker. The platform will provide you with price charts about the different trading commodities. Once you find an investment that you want, you can place the order from your trading platform and begin trading. 

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