What are advantages of investing in commodities?
- Diversification: Commodity investing gives your portfolio exposure to an asset class other than stocks. This can help you manage overall stock market volatility, although it does not guarantee a profit.
- Potential for high returns: Commodities fluctuate often, which also means they have the potential for higher returns. Rising demand for products could have a positive impact on your portfolio. However, with great returns comes great risk. While there might be demand for oil and metals today, tomorrow might be different.
- Hedging against inflation: Inflation can really eat into your investments. Historically, commodities tend to be higher during times of strong inflation. If you buy commodities before inflation hits, it could help you hedge against inflation losses from other investments.