The new forums will be named Coin Return (based on the most recent vote)! You can check on the status and timeline of the transition to the new forums here.
The Guiding Principles and New Rules document is now in effect.
Buying commodities
Hirocon
Registered User regular
Registered User regular
To diversify my investments I want to get some money in commodities like oil, food and precious metals.
Before anyone screams "commodities bubble", please understand that I'm not trying to just make a quick buck. I'm trying to diversify in case the price of commodities skyrocket further. I would actually love it if the price of commodities plummeted, even if I lost a lot of money in the process, since it would help the economy. I certainly won't be putting all my eggs in one basket. I already have a lot of money in cash, bonds, and index funds. Investing in commodities will actually make me more diversified.
How do I do this? I'd like to do the closest thing to actually owning the commodities directly. If it were in any way practical I would buy physical barrels of oil and store them in a safety deposit box. What's the next best alternative? How do I tie my investment as close as possible to the price of oil in a long-term friendly, tax-friendly, fee-friendly way?
In the case of precious metals it actually is possible to own the commodities directly. But how? Where do I buy gold and silver?
Before anyone screams "commodities bubble", please understand that I'm not trying to just make a quick buck. I'm trying to diversify in case the price of commodities skyrocket further. I would actually love it if the price of commodities plummeted, even if I lost a lot of money in the process, since it would help the economy. I certainly won't be putting all my eggs in one basket. I already have a lot of money in cash, bonds, and index funds. Investing in commodities will actually make me more diversified.
How do I do this? I'd like to do the closest thing to actually owning the commodities directly. If it were in any way practical I would buy physical barrels of oil and store them in a safety deposit box. What's the next best alternative? How do I tie my investment as close as possible to the price of oil in a long-term friendly, tax-friendly, fee-friendly way?
In the case of precious metals it actually is possible to own the commodities directly. But how? Where do I buy gold and silver?
Hirocon on
0
Posts
If you want to trade commodities futures you can try sites such as optionsxpress.com. I believe you can set up virtual accounts with play money and give it a try before commiting real money. Also, do a search for Futures Commission Merchant and read some of the results. Futures are way to much risk for me at my current level of knowledge so I'm not going to give any advice besides where to start looking. 10
If you want to actually have physical possesion of a commodity you'll want to look into metals, specifically gold and silver. Everything else would be a pain to obtain (for example platinum) or store (for example corn at 5000 bushels per contract). You can find gold and silver at any pawn shop or jewelry store but therein lays the problem too. You will be paying a significant premium to do this. You're chances of profiting this way are very slim. This would only be worth doing if you think the dollar will become worthless or the government defaults or something. 6
Now that I've answered your questions...
Notice I put a number at the end of each section. On a scale of 1 - 10 with 1 being Treasuries and 10 being 'most risky' that's how I would rate each option. If I can't convince you NOT to do this NOW of all times then at least allocate only a small (5% - 10%) percentage of your portfolio to it. I presume you are young enough to make back your losses through a job so you wouldn't be screwed to bad in the long run.
I feel I should add one more thing here. You realize the whole point of diversification is to lower risk and increase returns? By buying at a peak and expecting to lose money just so you can be diversified it kinda defeats the whole purpose of doing it in the first place. Let me ask you this, what exactly is your reason for wanting to get into commodities right now? There are other, safer alternatives for most any reason you can come up with. Don't jump into something because everyone else is doing it. You might end up as the guy holding the bag at the end.
And, like I said, I'm not going to invest a lot in commodities. I live below my means, and while I do this I plan to keep growing my cash reserves, and I plan to keep contributing to my IRA and 401k.
Oh and peak oil is bullshit. Love, nome.