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How to Invest in Commodities – Top Tips

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How to Invest in Commodities – Top Tips

What are Commodities?

Investing in the stock market is about buying stocks and shares or investing in mutual funds. Apart from the stock market, there is one more market where one can make investments with the objective of earning money. This is the commodity market. The commodity market or commodity exchange is where trading happens in commodities. So, what are commodities? They are goods or raw materials that are used to make other products. For example, wheat is a commodity. This is a raw material used to make bread and other food products. Similarly, gold is a commodity that is used to make gold ornaments and other jewellery items. Investing in commodities, therefore, involves buying physical goods that are of value and have some utility.

Commodities are classified under two major heads. They are hard and soft commodities.

  1. Hard commodities: These commodities usually need to be mined or obtained from the earth. They are commodities that are naturally found in some form or the other. Hard commodities include:
    1. Metals: These include precious metals like gold, silver, and platinum. Other metals traded are copper, aluminum, and palladium.
    2. Energies: These include those commodities used as a source of energy. Crude oil, Natural gas, gasoline, heating oil are energy-related commodities.
  2. Soft commodities: These commodities need to be grown, either in a field or from a ranch. These include:
    1. Crops: These include all agricultural products like corn, wheat, soybean, coffee, cotton, sugar, and rubber.
    2. Animal products: These are obtained from animals and include cattle meat, pork, and animal products like wool.

How to Invest in Commodities?

Commodities are physical goods, unlike stocks and mutual funds that are virtual or exist in the form of a document. This is why the commodity market is different from that of the share market. It requires a different approach to investing. If you were wondering, how you could invest in commodities, here are some of the ways:

  1. Buy physical commodities: This involves actual buying of a physical product like wheat, corn, or meat. You can buy the products at a particular price and then sell it at a higher price. This investment method is essentially meant for those who deal with the products on a daily basis. A common investor would not be comfortable with this method, as it involves having to store the product. You also need to protect the product against pests and the impact of weather. Buying and storing metals is easy. Since they are expensive, you need to safeguard them against theft. This method of investing is not usually meant for retail investors unless you plan to buy gold and silver.
  2. Buy commodity related fund or stocks: You can include commodity as a part of your investment strategy in the share market. You can buy shares of those companies that work in the commodity sector. For example, you can buy shares of an oil and gas company. You can also buy mutual funds that invest money in commodities or exchange traded funds. Here you are not buying commodities or investing in the commodity market but are buying securities from the stock market that in turn invest in commodities. This is a way by which you are invested in commodities without having to actually buy them or enter the commodity market. This approach is suitable for those who are new to investing and do not have much knowledge about the commodity market.
  3. Buy derivatives from the commodity market: This is an actual investment done from the commodity exchange. Here, you buy a product known as a derivative. This is an advanced investing method, where you are essentially speculating in the commodity market. Derivatives involve a contract between two parties. While there are many types of derivatives, the common ones you can invest in are futures and options.

Futures or a futures contract is an agreement to buy a particular commodity at a pre-agreed price in the future. Here, you are not buying the commodity, but have a contract to buy them in the future. This is a technique used by speculators who buy commodities the prices of which are likely to go up in the future. When you buy futures in gold at a particular price, you are buying a contract in gold at a particular price for the future, which could be a month from the date of buying the future. On the date when the contract expires, you will buy gold at the prevalent market price. If the market price has gone up, you end up with a profit. In general, investors do not wait for the contract to expire. When the price goes up, they sell it before expiry date and make money,

The other popular investment is an option. The difference as compared to futures is that in options, you have the right to buy the particular commodity on the date of expiry, but there is no obligation. If you believe a particular commodity’s price is going to go up in one month time, you will buy calls of that commodity. A call is an option that indicates increase in price. On the other hand, if you feel its price is going to decline, you can buy a put option. A put is where you feel the price is going to go down. You can exercise your call/put before the expiry date to make a profit. If the trade doesn’t go your way, you can end up with a loss.

Futures and options, or derivatives are a common way in which investment in the commodity market happens.

How the Commodity Market works?

The commodity market is in some way similar to the stock market, but there are differences too. The similarity is that you need to invest your money to buy commodities through an account with a broker. The difference is mainly in the volatility. It is well known that the stock market has major ups and downs. This is one of the reasons why people are scared to invest in the stock market. The commodity market is considered even more volatile than the stock market. Prices of commodities can undergo major changes very quickly. For instance, a crisis in any of the Gulf countries could lead to a sudden increase in crude oil prices. This can have a big impact on your investment.

At this point, please do note that the commodity market is not meant for the newbie investor, whose knowledge of this market is too limited. It is only meant for those who have some understanding about the market, especially the volatility. You must be ready to accept major fluctuations in prices. In the stock market, you would actually be owning a certain number of shares of the company. In the commodity market, you would buy futures and options. You do not own anything here but are only speculating. Individual investors generally do not physically buy commodities.

Because of the nature of the commodity market, financial experts advise that you do not invest more than 5 or 10% of your overall assets in commodities. If you are an experienced investor with knowledge about the commodity market, then you can consider investing more. Else, restricting your investment is advised. To invest in commodities, you need to understand how the market works. You also need to understand how that particular commodity is doing. For example, if you are investing in wheat, you need to know about the wheat market and whether wheat prices are expected to go up or come down.

Breaking it down

When it comes to the actual working, let’s assume you are buying oil futures. Unlike the stock market, where you can buy 1 share or 10 shares; in the commodity market, you buy predefined numbers of contracts. For example, if you want to deal with crude oil, you can buy contracts for different months. You would buy an August contract expiring on the last day of August. The unit of purchase would be in terms of barrels and you would need to buy a minimum of 100 barrels (100 futures contract). For example, the August price is 500, which means one barrel would cost 500 at the end of August. You need to spend 100 x 500 = 50000 to invest in crude oil.

In practice, you need not pay 50,000. You only need to pay a part of it known as margin money. For investing in futures and options, brokers give you leverage. This allows you to invest more money that you actually have. In the above example, if you have 10,000 you can invest it to buy 50,000 worth of futures contract. At the end of August, depending on the price of crude oil, the contract would be settled. As an investor, you will not usually wait until the last date but will settle before.

If your target price is reached beforehand, you can sell much earlier. You need to track the prices of crude oil. When the price reaches the target price you had in mind, you can sell it. This is just like the stock market, the only difference is it can be more volatile. If you feel that crude oil prices are going to fall, then you can short it. Shorting is selling first and then buying back later. This is suitable where prices are likely to fall. If however, through the month of August the prices do not rise, then you will end up making a loss.

Leverage: a boon or a curse

When you trade in commodities futures or options, the broker would give you leverage or allow you to invest much more money than you actually have. This is a great boon, as you need not have 100,000 in your account to buy options worth 100,000. You may need just 10,000 or 20,000 (depending on how much leverage your broker provides). This is a great way to make huge profits. You would be buying futures worth 100,000 by investing 20,000. If the prices go up, then you can make 150,000. So your profit will be 50,000 with an investment of just 20,000. This is the reason why commodities futures and options investments are popular. They allow you to earn huge profits.

Leverage can also be a curse. You can lose everything you have if the prices fluctuate. Unlike stocks, where you can hold on for a long term and wait, futures and contracts have to be settled on the date of expiry. You can not only lose the 20,000 you have invested but you may need to pay 20,000 more to the broker. Investing in commodities can make you lose big money if you do not understand how the market works.

How to invest in commodities with low risk?

If the idea of investing in the commodity market interests you, but you are not comfortable with the risk, then here are some tips to invest in commodities with lesser risk:

  • If you do invest in commodity future or options, don’t use the entire leverage. If you have 10,000, stick to investing for that much money or a little more. This will help you reduce your risk.
  • Don’t invest everything in one commodity. Diversify and reduce your risk by investing in different types of commodities.
  • Never invest in something you don’t understand.
  • If you know technical analysis, you can apply it to the commodities market to make money by using tools to predict price movement.
  • Invest in commodity exchange traded funds. This will help you to be invested in that commodity, but not directly. You can get the benefit of investing in commodities without having to risk investing in derivatives.
  • Invest in mutual funds that invest in commodities or that have a theme related to commodities.
  • Invest in precious metals and take delivery instead of speculating on futures and options. These are easy to store and can be held for long term, where its value can increase.
  • Futures and options involve trading and not investment. To be invested in the long run, ETFs and precious metals are the best ways to benefit from commodities.

How To

Guest Posting

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Guest Posting 1

The internet has set up brands at every corner of the street and getting people to visit yours is a mix of skill and art. The attempts to layout customer roadmaps to your brand which aren’t abandoned are not new and the struggles are the same as before. In fact, the struggle to have your brand heard has piled up as competition keeps emerging and viewer attention span keeps getting fragmented. This has led to a surge in brands using conventional advertisements to highly compress their message to the audience.

This is not the best gameplan to bet on. Ads are perceived by many as intrusive, insincere and housing an ulterior motive. The audience is bombarded with ads from every angle and making it shorter does not really help. Most people don’t react the same way to guest posting.

A guest post is a piece of brand journalism which lives on a publisher’s website. Sponsored posts are an advertorial piece of long-form writing that is created to be highly engaging. They avoid the intrusive and abrupt conventional-approach of ads and indulge in a more respectful and subtle modern-approach for recommending your services or products.

Choosing the right platforms to publish your guest post is crucial as the platform is seen as your partner and representative. Your chosen platform must balance between writing a blog post and a traditional advertisement, stray away from being intrusive and stick with being subtle and respectful. At Global Banking and Finance (GBAF), we offer the opportunity to bank on our decade-long experience and expertise in writing balanced content like this.

How Can Guest Posts on GBAF Help You?

Constantly investing time and effort into writing and publishing on your blog is great for fostering and strengthening your already existing audience relationship but this doesn’t help you reach a new audience.

Guest posting opportunities on our platform gives you access to an untapped audience base. This is a significant advantage in two ways:

  • Familiarity: We have built our audience through our authentic, thought-provoking and storytelling writing nature. Our audience is familiar and receptive to this writing style. When we adapt your content in the same format, it allows your content to have better reception compared to traditional ads. Also, your content will adapt to the environment of content which makes it feel natural and less abrupt or intrusive.
  • Trust: When a consumer learns about your brand through someone they trust (someone like a renowned brand, friend, some industry authority, etc), they are more likely to trust you, too. Our audience’s trust means a chance for your brand’s voice to be heard. It also means having customers who have completed their journey of brand choice. When they choose you, it will be an additional choice of transition from our platform rather than a new choice of approaching you. They only have to go half-way.

With amplified brand reach and redefined trust, your brand visibility and credibility will be boosted. We also help you boost visibility by leveraging our social media channels which currently have 135k followers and keep growing every day.

Another major area of impact when doing guest posts with GBAF is the focus, delivery and expertise of writing. The audience members will engage with your content much more than they do with your traditional ads. This will increase the chances of convincing the customers who doubt, skepticize and speculate becoming customers of your brand from afar. Writing to deliver your promotion with value-driven content also allows you to plug in a recommendation at a crucial point of the problem with your brand as the solution.

Lastly, value-driven content avoids the intrusive BUY THIS! style of writing. Here, the focus is on communicating your knowledge and therefore allows you to establish yourself as a thought-leader in your niche.

All of these combined benefits act as a catalyst to boost your brand reach, funnel attention to your brand, gain a competitive advantage and knock down all other challenges presented in separating yourself from your competition.

Final Thoughts

Brand adoption is slow. Abandoning an old familiar brand route for a new one is difficult. People rarely reach out to brands and they sprint the other way if they see brands reach out to them through conventional and dull ads. In such a deadlock scenario guest posts can provide the perfect strategy to bet on.

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Why Guest Posting is Your Best Bet

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Why Guest Posting is Your Best Bet 2

In a scenario where new businesses are popping up everyday, one of the major challenges brands face is that of devising an organic and effective way to get the attention of their target audience. And one of the first solutions that comes to mind is the internet and consecutively, digital marketing. Even though its all-pervasive nature has made it both super-easy to reach people across the globe, the internet also comes with its own set of challenges. In this article, we will discuss the tough-to-crack parts of digital marketing, things that almost every brand representative or marketing executive has to face in the present date.

The oversimplification of digital communication has deceived many brands into believing that it’s the only way to reach their audience. However, the reality is hardly so. Today, there are more platforms and media formats than there have ever been before and newer ones keep emerging everyday. As a result, the netizens have developed a rapidly decreasing attention span. As a result, brands are wrestling to fit their message into as tiny a space as possible in what can only be called conventional methods of advertising.

For many brands, digital marketing proves to be an ordeal that takes years to crack, all the while draining the brand’s potential for more business and/or larger reach. It is worth noting that one of the major challenges that most businesses face is that of people avoiding ads altogether; no matter how good your ad is, chances are that people don’t want to see it, resulting in zero engagement. The second and bigger challenge is that short messages don’t convert those who are unaware of your brand, to brand loyalists. Instead, these ads are likely to affect only those who are already considering buying into what your brand is offering, which might be a small share.

This is where Global Banking & Finance Review (GBAF) comes in. We offer you the opportunity to overcome both the challenges (and more) in one go through our guest post services.

Guest Posts Have An Edge Over Normative Advertisements

Guest posts are advertorial pieces of long-form writing, created with an aim to engage the audience by taking away the impression of normative ads. How? Sponsored posting articles are so designed that they address the audience’s demands or queries, and also offer your brand as a solution instead of point-blank marketing. Consequently, this makes the audience spend a longer time engaging with your brand than they would do with, say, a pop-up ad. Through a guest blog post, your brand has the space to engage in a fair exchange because the article delivers value to your audience rather than being a conventional sales-driven advertisement.

To sum it up, sponsored posts fall right on the sweet spot between a blog post and a traditional advertisement on the spectrum of advertising.

Here’s Why You Should Run Guest Posts on GBAF

At GBAF, our team understands the importance of the environment in which your brand is introduced to an audience, something that leaves a lasting impact on their minds. It goes without saying that this very impression will influence and drive their future decisions on whether they want to engage with your brand and buy what you’re selling. Hence, it is our staff that is usually responsible for writing the posts that go up for your brand on our website. This allows for the sponsored post to merge in seamlessly with the existing content in our website instead of sticking out like a sore thumb. The aim in doing so is to create these posts in a way that does not distract or seem abrupt as guest posts are meant to be adaptive to an existing environment. So, even though it is essentially promoting your brand, a sponsored post is more of a brand journalism piece than an ad.

On our platform, we understand the importance readers attach to authenticity and value. This also allows GBAF to have a firm grip on introducing your brand effectively while simultaneously catering to the audience’s needs. Our team works around the clock to gain our audience’s trust by continually delivering authentic and value-driven content to our readers for more than a decade. When you partner with us, that resource pool is easy to tp into. When a consumer learns about your brand through a reliable source (for instance, someone like a renowned brand, friend, some industry authority, etc), they are more likely to trust you, too.

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Why You Need to Take Guest Posting Seriously

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Why You Need to Take Guest Posting Seriously 3

When customers are largely in control of marketing conversations, traditional advertisement has lost its touch. How you educate your prospects and out-educate your competitors now win the battle and generate leads.

If you’re the spokesperson of a brand or if it is your job to tell a story that your customers care about, you know how important it is to be generous, to share your ideas on a platform that promotes storytelling, and to position your brand as the most trusted partner for your customers.

The challenge with quick, easy micro-copy is that it fails to make an impact. It’s like a quick-fix that we try to use in everything we do. However, quick-fixes don’t heal a burning pain-point. A thoughtful, easy-to-read, user-friendly guide does.

At Global Banking & Finance Review (GBAF), we help you help your customers. Here’s how.

Guest Posting: How it Works

Guest posting is the art of telling your story to your audience without shoving it down their throats. It’s not an advertisement, but a thought-leadership content piece that educates & promotes your brand to your target audience without interrupting them.

  • Our editorial team works your content piece to present your brand on our website
  • The sponsored articles adhere to the context, the tone, the voice of your brand and represent it in the way you’d like to portray to your audience
  • The content piece is lucidly written and only does one job, i.e. educating your audience
  • The piece is long-form of content that allows your target audience to engage with your brand longer (much more than an advertisement)
  • It doesn’t distract, interrupt, or intrude the audience
  • Sponsored posts are designed and articulated to solve the audience’s pain-point and showcase your brand as a solution-provider

Why Should You Run Guest Posts on GBAF?

GBAF is a platform that garners a community of over 135,000. Here are four reasons for which you should run guest posts on GBAF:

  1. We help you increase the engagement with your audience: We don’t depend on surveys to understand what your target audience wants. For the last ten years, we have been serving various kinds of readers. And we know them personally. Thus, we know how to place your content to increase engagement.
  2. We put your audience ahead of the marketing funnel: When you run an ad, you start from scratch. And as a result, the first step is always to start with the beginning of the marketing funnel. When you publish a guest post on our platform, your target audience already begins to trust you since we’ve put years of work in building the community.
  3. We help you generate leads: An ad is interruptive. When you submit a guest post on GBAF, it teaches instead. And directs the audience to take action. As a result, you generate more leads. In this era of marketing, the brand that educates better, profits more.
  4. We offer you cost-effective solutions: When you run sponsored articles on GBAF, you’re in charge of your budget. You decide how much you’d like to spend per month. And we support you with cost-effective solutions backed up with the results so that you can calculate your ROI upfront.

How to Submit a Guest Post on GBAF

  • Check categories:
  • B2B: CSR, Green Tech, AI & Big Data, Ongoing Training for Employees, Manufacturing
  • B2C: Travel Destinations, Trends on Buying a Home, Working Remotely, Electronics
  • Follow guidelines:
  • Format: Word format
  • Send at: [email protected] (or use this page to submit a guest post)
  • Length: 750 – 1000 words
  • Image: We need an image of the author (specifications: width – 800 px. & heigh – 600 px.) with original credits
  • Additional requirements:
  • Author Bio: Provide an author bio (name, title, affiliation, bio, and contact). You can add a link
  • Profile: Give a brief overview of the company, key information about the company, major projects, certifications, and company logo. Please submit the profile in word format

We review your submission and if it adheres to our submission guidelines and quality standards, we will connect with you before publishing the article.

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