When you want to invest in a commodity, you become scared of trading commodity futures. But how about commodity mutual funds and commodity ETFs. Now for people who have never invested before, commodity mutual funds are the reliable bet as they are the limited risky. But if you want to earn high returns than you should be ready to take on more risk!
Primarily, why trade in commodities? Did you come over this breaking news that gold explodes to a new all-time record high? Gold shares are up by 8% despite an upmarket. Do you know that gold rates have been on the increase for the last decade and have now crossed the $1000 per ounce limit? Furthermore, crude oil rates are also supposed to bounce up to $200 per barrel as the global economy increases from the return.
What we are observing is the start of a secular bull market in commodities. Some state it had previously begun a few years back. Well, in any case, this secular bull market is assumed to last for a few decades. The best way to earn profit from commodities is to invest in a safe commodity ETF.
Presently, ETFs provides you the advantage of diversification simply like a mutual fund but they have fewer fees something like 0.7% as analyzed to 2-4% of the mutual funds. Another additional advantage is that ETF stocks can be invested just like shares. You can go both long term or short term on the stocks of ETF anytime you want, unlike mutual fund stocks that can only be purchased after hours.
So ETFs give you with the advantage of both diversifications as well as liquidity. Commodity ETFs trade in a basket of commodities by derivative contracts based on commodities. Suppose the example of commodity ETF started by yes Bank in 2006. Now, this commodity ETF copies a commodity index based on a basket of six commodities: crude oil, cooking oil, gold, aluminum, corn, and grain.
This commodity ETF invest directly in commodity futures securities that are moved over all month which can perform this commodity ETF volatile. You can find now several trustworthy commodity ETFs in the market that follows individual commodities like gold, silver or crude oil.
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