Because they are not based on the profits or business strategies of any one company or nation, commodities can make good, steady investments. Gold, for example, is a commodity that will not disappear any time soon, whereas stock in a large car company may or may not exist in another hundred years.
Additionally, varied asset allocation allows an individual to spread out their financial portfolio. By differentiating the types of investments, an investor stands to greatly reduce his or her risk of suffering a major financial wipe-out, as every sector of the financial market would have to completely collapse to destroy their investment portfolio, a scenario that would undoubtedly be the end of society as it is currently known.
In the 2008 financial collapse, for example, several major institutions went bankrupt due to faulty business practices. Stockholders in these institutions lost money. However, the commodities market is largely immune to collapses of this type. By its very nature, a commodity is not ‘owned’ by any one entity. Commodities can therefore provide a reliable source of income for an investor who has spent time carefully considering what commodity he is buying, when he is buying it, and at what price he plans to sell it.
For those investors who are unfamiliar with commodities, or who are buying into the market in order to differentiate their portfolio, there are several different ways to invest in the commodities market. There are commodities indexes, commodities exchanges, and numerous types of contracts and buying options which allow a savvy financial investor to make considerable amounts of money based on the expected performance of a given commodity. As with any financial venture, extensive research is a definite pre-requisite to investment.
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