| Most stock analyst will agree that it is a sound | | | | commodity mutual funds, then you have some |
| financial idea to diversify your stock portfolio with | | | | protection from a downward swing in the stock |
| some type of commodity investment, such as | | | | market. Commodities also do well during times as |
| commodity mutual funds. However, few will make | | | | of inflation. And they are a good hedge during |
| that recommendation to you because they do | | | | times of a weak dollar. |
| not study or analyze commodities. | | | | People that buy and sell commodities say three |
| Commodities operate in a little different fashion | | | | things about them. They offer high risk and the |
| than stocks. Buying a commodity means you | | | | chance for high return. And third, that commodity |
| actually own something, or in the future you will | | | | markets are easy to understand. I agree with the |
| own something, whether it be so many bushels of | | | | first statement. There is high risk in buying |
| corn, pounds of gold, or barrels of oil. You are | | | | commodities direct. That is why we should leave |
| dealing with real goods, not the performance of a | | | | them to the people who have the time and |
| company. Typically, you are buying a contract for | | | | resources to do the needed research. The high |
| a future buy or sell of these goods. And it is a | | | | risk outweighs the high return to me. And I feel |
| contract you never expect to complete. | | | | commodity markets are difficult to understand, |
| So why will commodities be good for my | | | | enough so that I do not go near them. |
| portfolio? You know when the bottom falls out of | | | | To take advantage of the diversification benefits |
| the stock market and all stocks are dragged | | | | of commodities there are other choices available, |
| down with it, not so with commodities. The price | | | | such as commodity mutual funds. They are similar |
| of commodities reacts more on the good old | | | | to stock mutual funds in that there are many |
| supply and demand principal. The fewer the | | | | types to choose from, just as there are many |
| products available, the higher the price goes. If | | | | brokers to buy them from. Do a little research on |
| there are more products than buyers, the price | | | | the funds and brokers and put some |
| will go down. If you have a small percentage of | | | | diversification into your portfolio. |
| your portfolio (around 10% is recommended) in | | | | |