The companies in this sector are grouped in their own index that can serve to satisfy investor demand. However, to simplify operations, the most effective strategy is materialized through listed funds. You can even open positions from the international markets where the most basic foods are listed, although assuming more risks in capital movements.
Food is not only a substance for the subsistence of the population. It is a new option to make savings profitable from different approaches, but with a common objective: to obtain a return on capital. This strategy can materialize from the listed companies that are dedicated to its commercialization: Ebro Foods, Deoleo, Telepizza or Natra among the most relevant of the Spanish equities. Although it is much easier to develop this desire through an exchange-traded fund based on this sector. In any case, it will always be a last resort to go to all those indexes that are based on the most basic foods. Such as sugar, soy, wheat, etc. They are listed on the most important financial markets in the world.
In any case, whatever the choice, there is a common denominator in all these investment proposals. It is none other than their refuge role before the most unfavorable scenarios for financial markets. For a very easy reason for all investors to understand and that is that their business models are not cyclical. That is to say, its consumption does not understand economic cycles, but on the contrary it constitutes a necessity for the population. From these characteristics It is time to detect which investment models can satisfy this very special demand.
Securities grouped in this sector
If excessive sophistication is not desired, the best solution is to buy and sell shares on the stock market. It is a sector in Spain that is very limited in terms of the number of stock market proposals, but one that provides less volatility with respect to its price. To the extent that it protects investors' positions against the appearance of downtrends in equity markets. While the differences in their price in a single trading session rarely exceed 2%, in contrast to some of the more aggressive segments (technologies, banks or construction companies) with margins that can rise up to 5%.
However, to expand the supply of the food sector, the most sensible option is to resort to the European stock market represented by the index Stoxx 600 Europe Food & Beverage. It presents a list that includes companies such as Nestlé, Unilever and Danone, among some of the best known. The evolution of this sector over the last year has been positive, appreciating around 10%. Under identical percentages of profits as those generated in the Eurostoxx 50.
Indices on the international stock market
There is another way to take positions in these financial assets without intermediaries. But directly on the international indices where basic foods (sugar, coffee or wheat are traded. There will be no choice but to go to the most important financial markets, such as the United States and Great Britain. uneven evolution depending on the chosen format. One of these exponents is the Commodity CRB Coffee which shows an annual variation of only 0,25%. Another option is to bring together several of these raw materials in a single index such as the one that represents Global AgriTR which has been revalued in the last twelve months by 22,7%.
Nor are these benchmark indices exempt from suffering losses in their evolution during the last financial year. As in the specific case of Commodity CRB Sugar which has been left in this period 2,76% of the value. Even seemingly flat, like Commodity CRB Orange Juice that has hardly generated changes in its price by generating a markedly lateral trend.
ETFs to diversify investment
Also known as exchange-traded funds, these products capture the presence of these raw materials in financial markets. Traditionally have beaten other assets in profitability during scenarios of high inflation and even recession in equity markets. At the same time it serves investors to protect themselves against risks in the economy. Under these approaches, two ETFs have appeared that provide this characteristic and that have begun to trade on the London Stock Exchange. To access this market in a more diversified way and generate growth from very affordable economic contributions.
One of the exchange traded funds is ETFS All Commodities GO UCITS, which bases its strategy on tracking a commodity futures index for the month. It is conceived under a more short-term approach. The other option, ETFS Longer Dated All Commodities Ex-Agriculture And Livestock, acts on an index of long-term futures which is more diversified by expanding to other financial assets from the energy and metals sector. In any case, they are products that combine investment in the stock market and investment funds.
Advantages of this investment
Of course, you are facing a more atypical investment than few there are at the moment. It is precisely for this reason that it requires special attention from you. Especially because it needs a greater knowledge of the markets where these financial assets operate. To the point that if you do not comply you have the risk of lose a lot of money invested in these financial assets. From this general scenario, these are some of the advantages that investment in this class of raw materials brings.
It is an investment model that can be more profitable than others at a certain time. Especially when the equity markets are not going through the best of times and you don't have real options to make your personal assets profitable. Not surprisingly, at some point or other raw materials can become refuge values for a good part of the small and medium investors.
It is a good that is basic for the world population and therefore there will always be a demand for these foods. To a greater or lesser extent and that will be what will determine the prices set by the financial markets. With oscillations which can become very strong as a consequence of the level of production and consumption. That you can take advantage of it to carry out operations and obtain large capital gains in the operations that you are going to carry out from now on.
Of course, it is an alternative investment but one that is not exempt from excellent profitability ratios. The key will lie in knowing choose the time of entry and if you can leave at the right time. So that in this way, your earnings are more satisfactory than normal. Even above the advances generated in the more conventional equity markets. So that you are in a position to optimize all your operations from the first moment.
These are products that are well known to all and that are not sophisticated like others. From this perspective, you will have complete security of knowing where you invest your money. Without any kind of oddities in the destination of your monetary contributions and that can lead you to little less than unwanted situations. As has happened in recent years with the so-called toxic financial products. Of course, this is not the case, even with the risk that such special operations entail.
Disadvantages of this investment
Raw materials, on the other hand, also generate a series of damages that you should know from this very moment. So that you are more protected in all the operations that you are going to carry out from now on. These are some of the most relevant.
- They require a greater complexity which is derived from the very characteristics of these raw materials. Of course, it is not the same as buying and selling shares on the stock market. Rather, it is governed by significantly different mechanics. Neither better nor worse, if not different.
- Demand that you have a much more qualified training than through other financial assets. If you do not meet this important requirement, it will be better to opt for another class of investments with which you are more used to operating. This investment is not worth going if you do not know how its mechanics are.
- These raw materials are priced at about very specific financial markets and it is not always easy to operate with these alternatives in investment. Even to adjust the entry and exit prices of the positions of these products.
It is not highly recommended to allocate many amounts in these investments. But on the contrary a minimum part will suffice from the same. In this way, you will give yourself a more effective protection to the operations carried out. Because if there is a common denominator in these financial assets, it is the volatility in their prices. Beyond other technical considerations that may affect the monitoring of this kind of investments. Something that does not occur in other financial products.