Companies focused on these raw materials are classified under two criteria that should be taken into account when contracting these financial products. On the one hand, depending on its size. Where those of increased risk logically they are the small ones. With a division between producers and exploiters. The exploiters bear the risk of searching and excavating, while the others focus on treatment and distribution. These data are very relevant at the time of formalizing this investment alternative.
It is also necessary to emphasize that the main market where gold, silver and others are traded non-precious metals (such as aluminum, copper, lead, nickel, zinc or tin) is the COMEX. However, the exception is platinum since the main market is TOCOM, whose operations are carried out in the Japanese yen, and the NYMEX. These are the financial markets that you have to go to if you want to invest your savings in some of the raw materials mentioned and another with similar characteristics.
On the other hand, the gold market is tremendously influenced by the flows generated in the futures markets. While the correlation for crude oil is 50% on the subject of gold, the price can be explained by 70% and 90%. In any case, you cannot forget that some of the product providers in the financial market are the following: Merril Lynch, Ruffer or SG, among the most relevant. That is, what products of these characteristics sell and which provide different solutions to small and medium investors.
Commodities: high volatility
Among the most important characteristics within this investment called as an alternative is the fact of hiring other non-euro currencies. Because in effect, it cannot be forgotten that the appreciation of the American currency in view of the negative correlation that has historically presented some of the most relevant raw materials. While on the other hand, it should be noted that the volatility of funds based on these financial assets is around 20%. With which, the risk in operations is always much higher. To the point that there can be large fluctuations in your alternative investment portfolio.
This fact generates that the differences between their maximum and minimum prices are very important and in any case higher than in other more conventional investments. For example, through the purchase and sale of shares in the equity markets. What makes it a very suitable product for trading or speculative operations due to its high component of variations in the conformation of its prices. Where you can earn a lot of money, but for the same reason, leave a lot of euros on the road from now on.
How to hire them?
Another risk factor is the strong weight that ETFs and other derivative instruments have on the price of these raw materials and on the inflows and outflows of this financial asset. It should be remembered that exchange-traded funds is a mix between traditional mutual funds and the buying and selling of shares on the equity markets. With the advantage over these that it provides commissions that in all cases are more competitive. Thus, you are in a position to make more profitable operations in some of these raw materials. To the point that you will save a lot of euros in its management or maintenance.
Exchange traded funds, on the other hand, offer you a wide range of models that provide this feature. Based on different raw materials: gold, coffee, wheat, soy or cocoa among some of the most relevant. Through an investment portfolio that is very well defined from the moment of its preparation and until the operations are settled. Where you can direct the movements to all the terms of permanence: short, medium and long. Depending on the profile you present as a small and medium investor: aggressive, intermediate or conservative or defensive.
Direct hire
While another part, there is also the possibility of seeing that the mining production increases and you can contract raw materials directly in the markets where these financial products are bought and sold. Not by new farms but by higher production of the existing ones. This risk is limited by the high dividends that the companies in charge of its commercialization have been distributing. Where it stands out the fact that the reinvestment policy has been minimal and this is something that always favors you as a small and medium investor.
In this sense, it is very interesting to assess that there are many listed companies that are closely linked to the production of these raw materials. Both in national markets and outside our borders so that in this way you can better diversify your investments from now on. Without at any time the profitability of the same suffer in financial operations, as is your wish at this time. So you can invest your capital, for example, in wheat or cocoa. Raw materials that are showing high profitability in recent months.
Raw materials in funds
Another alternative to channel your investments is materialized through the investment funds of these characteristics. One of its main contributions lies in the fact that they can be complemented with other financial assets. Both from fixed income and variable income or even from other alternative models such as this one. So that in this way, you can also diversify investments in an optimal and stable way. To create a very interesting savings bag for the medium and long term. As an investment strategy to make the savings profitable in these periods of time.
While on the other hand, investment funds based on these very special financial assets constitute an option to the more conventional investment. Especially when a great instability in equity markets for one reason or another. Being a solution to the lack of proposals to develop investments other than the purchase and sale of shares in the equity markets. How can happen at this time in the stock market when entering a trend change, going from bullish to bearish. Something that can undoubtedly discourage you in your intentions to make the savings profitable.
Characteristics of these markets
There is no doubt that taking advantage of the opportunity cost of having your premium money on your senior balances Interest rate It is one of the benefits that investment in raw materials offers you. Above other series of considerations of a technical nature and perhaps also from the point of view of its fundamentals. Because investing in raw materials has always been one of the resources that small and medium investors had at hand. Especially in other years when price stability was one of the most relevant common denominators.
In addition, you cannot forget that this kind of investment was not speculative at all, although in this sense its structure has undergone a modification in the way of operating. To the point that it is no longer the same to hire these special products. Not surprisingly, the risks are increasing, among other reasons for its high volatility that can even take up to 30% or 40% in the conformation of its prices. So that you have more problems adjusting prices, both in the sale or purchase operations.
Current situation of the markets
Right now, there are some very profitable commodities that outperform equity markets. Especially for precious metals that offer returns on savings close to 50% in the last year. Very specifically gold, which is a security that acts as a safe haven in the face of stability scenarios in the equity markets. Where a good part of the capital of investors who want peace of mind when building their investment portfolio goes.
Finally, it should also be emphasized that this class of investments should serve as a complement to the main ones. Never as a priority movement since this investment strategy can produce unwanted effects on your income statement. Beyond another series of more technical considerations. In any case, you should analyze these investment proposals because there is a lot at stake in this kind of operations on raw materials. Because on the other hand, most of these operations are carried out in other currencies other than the euro: US dollar, Swiss franc or Japanese yen. With the monetary cost that the currency exchange entails in each of the chosen financial products: commissions, fees, etc.