Commodities

Question 1

Commodities

Answer 1

tangible goods or raw materials that are tradable in standardized contracts on commodities exchanges.

an asset class distinct from traditional investments like stocks, bonds, and cash.

Investing in commodities can provide portfolio diversification, inflation protection, and potential for capital appreciation

Question 2

Categories of commodities

Answer 2

Energy Commodities (crude oil, natural gas, heating oil, and gasoline.)

Precious Metals (gold, silver, platinum, and palladium) - stores of value

Industrial Metals (copper, aluminum, nickel, zinc, and lead) - manufacturing/constructing

Agricultural Commodities (wheat, corn, soybeans, coffee, sugar, cotton, and livestock)

Question 3

How to invest in Commodities

Answer 3

Futures Contracts (buy or sell a specific quantity of a commodity at a predetermined price and future date.)

Exchange-Traded Funds (ETFs): (exposure to various commodities without directly owning physical goods.)

Commodity-Linked Notes and Certificates (linked to the price performance of a specific commodity or commodity index)

Physical Ownership (gold bars or silver coins)

Question 4

Advantages of Commodities as alternative investments

Answer 4

Diversification

Inflation Hedge

Potential for Capital Appreciation

Tangible Assets

Question 5

Risks and Considerations

Answer 5

Price Volatility

Lack of Income Generation (do not generate income)

Storage and Transportation Costs

Market and Liquidity Risks

Contango (future prices higher than spot prices) and Backwardation (future prices lower than spot prices)