There are many benefits to investing in commodities, but the risks are high as well. In addition to the volatility of the price, commodity investments can result in high returns or substantial losses. This is why it is crucial to understand the market before making a purchase. This article will discuss the pros and cons of investing in commodities. Read on to learn more. Investing in commodities is a great way to diversify your portfolio.
Commodities offer diversification. Investing in commodities is a way to get exposure to different growth opportunities. For example, iron ore prices rose threefold in 2008-2010 due to supercharged Chinese economic growth. In addition, the price of commodities has historically shown a low correlation to stocks, and negative correlation with bonds. This means that they are an excellent way to protect against inflation. Furthermore, commodities tend to rise along with prices.
In addition to their diversification benefits, commodities can offer diversification. By investing in various commodities, you gain exposure to different growth markets and currencies. Inflation is another benefit of investing in commodities. While they are prone to high volatility, commodities are a safe bet during periods of high economic growth. Buying commodities in the futures market is risky, but it can also help protect you from inflation. After all, you can’t predict when inflation will rise.