Invest in commodities today using NinjaTrader as your trusted broker.
While most people may think stocks and bonds are the only investment options, but if you're learning how to invest in commodities you may know that they provide an option to diversify a portfolio.
Though most people are familiar with buying physical gold or other precious metals, today’s market offers a variety of options from exchange-traded funds (ETFs) to futures contracts.
Steps to Invest in Commodities
Investing in commodities can be done in a few simple steps.
Educate Yourself
Before you invest in commodities, it's important to understand the various types of commodities, such as metals, energy, and agricultural products. Take some time to learn how the commodities market functions and what influences prices. Get to know key terms and concepts like futures contracts, spot prices, and market volatility.
Determine Your Investment Strategy
You need to choose if you want to invest directly by buying physical assets like gold or silver, or indirectly through options like commodity futures contracts, ETFs, or mutual funds that follow commodity prices. Think about your risk tolerance, investment goals, and time frame to figure out which approach is best for your financial objectives.
Open a Brokerage Account
To invest in commodities via futures or ETFs, you’ll need to set up a brokerage account. It’s important to research and pick a brokerage that gives you access to commodity markets and has the tools and resources needed for trading. Be sure to check the fees and commissions related to the brokerage.
Diversify Your Portfolio
To manage risk in commodity investments, it's important to diversify. Holding a variety of commodities or assets in the commodities sector—like precious metals, energy, and agriculture—can help spread risks and take advantage of different market opportunities.
Monitor the Market and Adjust Your Strategy
Keep up with market trends and economic factors that can affect commodity prices, like geopolitical events, weather, and supply and demand changes. Regularly check your investment portfolio and be ready to modify your strategy based on market conditions, performance, and your financial objectives.
What are Commodities?
Commodities are basic goods that can be substituted with other equivalent goods of the same variety. These include:
- Precious metals, such as gold and silver
- Energy such as crude oil and natural gas
- Industrial metals such as copper and tin
- Food products including wheat and cattle
The graph below shows how there is generally an inverse relationship between the U.S. dollar and the gold and oil commodities. Some commodities differentiate based on from where they’re supplied, such as West Texas Crude vs. London Brent Crude. Commodities also play into inflation as they are direct input costs for many industries and uses, such as steel for buildings and gas for cars.
As the cost of commodities rise, consumers spend more money to buy the same amount of the commodity, leaving them with less to purchase other goods and services.
Build Your Investment Account Through the Commodity Market
Commodities offer a unique way to invest in an asset class other than stocks. Though commodity prices can be relatively stable for long periods of time, technological advances like fracking for oil can cause quick changes in the price of a commodity. Additionally, commodities can be influenced by natural events and supply disruptions.
Want to learn more about commodities trading? Check out Benzinga's guides to the best futures brokers, the best commodity ETFs and how to invest in oil.
Try IQcent
IQcent is an all-in-one trading platform with the capacity to help you trade crypto, other digital assets, indices, stocks, commodity investing etc. This platform serves as a powerful took for international traders who want to diversify their portfolios and make it easier to gain access to a range of financial markets. Because it offers access to commodities, you can further expand your portfolio beyond the range of other online brokerage account options.
With IQcent, you also get:
- A massive array of tradable assets
- High leverage options
- Small minimum order sizes
- Multiple (and instant) funding options
IQcent offers a proprietary trading platform that’s compatible with a range of devices, and there’s no software or an app to download. Straightforward and easy to navigate, experienced or novice traders can jump into IQcent and get started today.
Frequently Asked Questions
What is the best way to invest in commodities?
A good approach to investing in commodities is by using diversified exchange-traded funds (ETFs) that follow commodity indices. This method lets investors access a variety of commodities without having to buy them directly. Alternatively, one can invest in futures contracts or stocks of companies that produce commodities for a more focused investment, but this option demands a better grasp of market dynamics and associated risks.
How to trade commodities for beginners?
If you’re new to trading commodities, begin by exploring the various options like agricultural goods, metals, and energy. Pick a market that catches your interest. Next, set up a trading account with a trustworthy broker, familiarize yourself with trading platforms, and create a simple trading strategy. It’s also important to manage your risk by diversifying and using stop-loss orders.
Can anyone invest in commodities?
Anyone can invest in commodities through different options like futures contracts, ETFs, and mutual funds that individual investors can access. However, it’s essential to be aware of the risks and do proper research before getting into the commodities market.