Commodities are an interesting asset class right now for a number of reasons. Commodity investing is a good way to play both offense (global economic recovery) and defense (a hedge for your portfolio against rising future inflation and a falling dollar). They are also a great portfolio diversifier which can reduce the overall risk (volatility) of your portfolio.
Playing Offense: The global economic rebound is coming, and commodities will benefit.
Most of the economies in the world are currently in severe recessions or have significantly lower economic growth than 2 years ago. There are now many signs that the US economy and many other economies have bottomed out and are starting to show signs of life again. US economic growth has improved from a -6% rate over the winter to a -1% rate in the second quarter of 2009 and it will likely show positive economic growth in the second half of 2009. As the economies around the world go from serious recessions to positive economic growth over the next 2 years the demand for commodities will increase and their prices will go up. This global economic growth is likely to be led by China and many other emerging countries which tend to be commodity-based or commodity-heavy economies. Continue reading ‘Investing in Commodities’ »