Basics - food , energy, shelter?

Malthusian

justme111 said:

Got it now. Ridiculous as I do not know much of what I am doing- feels like a gamble. 🤭

That's because it is (a gamble, that is). Commodities have no yield and an investment in a commodity ETF is simply a bet that, having already jumped 30% in response to recent news, commodities will continue to rise in price still further beyond market expectations.

Also bear in mind that a commodity ETF does not invest in the commodities themselves, but derivatives; i.e. contracts to deliver commodities in a certain period of time. The ETF periodically sells its derivatives just before they mature (and someone dumps a truckful of squealing pigs on the fund manager's doorstep) in order to buy new ones.

Without going into detail about contango and backwardation (which I'd have to look up on Wikipedia due to not being a commodity trader), this means that the ETF will behave slightly differently to the underlying commodities, adding an additional layer of risk.

That said, even though it is a gamble, it is arguably a diversifier as in a "stagflationary" atmosphere (where prices are rising but economic growth is negative) it should do well while everything else is doing badly. I personally wouldn't buy it as I have a 30-odd year investment horizon and don't particularly care what happens to my fund value over the next 5, and over a full economic cycle or two, any zero-yield investment is a losing bet. But those who take more of an interest in short-term performance may feel better with having allocated some of their money to commodities.

justme111

Thank you.
Is there a way to investit into commodities better and more directly ?
I think remaining 60% of my this year pension contributions will go to MSCI World...

coyrls

If you want to invest directly you would have to buy commodities, store them and sell them later.

justme111

Deleted_User said:

justme111 said:

Thank you.
Is there a way to investit into commodities better and more directly ?

If you want to avoid the issues with derivatives, that is only practical for precious metals, not other commodities. You can buy ETCs for (e.g.) gold which do buy and store gold, so your return will the change in the gold price minus the charges.

Thank you, Feraldog
I was meaning to invest into food mostly and fuel ; I already have a bit of gold and was not keen in more.

tebbins

justme111 said:

Deleted_User said:

justme111 said:

Thank you.
Is there a way to investit into commodities better and more directly ?

If you want to avoid the issues with derivatives, that is only practical for precious metals, not other commodities. You can buy ETCs for (e.g.) gold which do buy and store gold, so your return will the change in the gold price minus the charges.

Thank you, Feraldog
I was meaning to invest into food mostly and fuel ; I already have a bit of gold and was not keen in more.

Do you have an industrial fridge/freezer/warehouse/fuel tank at home?
If not I don't see how you're going to do that.