I’m a huge fan of commodities, and there’s a reason for that.  In the end, the world economy is outrageously volatile. An international investor has to be careful which country he invests in, given that some countries are going up while others are going down. This volatility also exists on a market level and a company level. This volatility is what destroys most investors’ profits.

So how do you skip the volatile nature of investing? Completely skipping it is obviously impossible, but there are tactics for negating the effects of market swings. The two most common are dividend investing and value investing. We can talk about those some other time. In this article, I’ll be explaining my case for investing in commodities.

To summarize my case for commodities: the world needs stuff, and the world economy is going to grow over the next few decades. That makes commodities a safe bet over the next few decades. Simplistic? Yes. So let’s go into details:

The World Needs “Stuff”

Sure it’s simplistic to refer to “commodities” as just “stuff” — but it makes sense. Commodities are the raw resources that make up the physical aspect of civilization. Iron, wheat, gold, silver, copper, coal — these are the raw resources that are necessary for economic expansion.

This is simply inevitable. It’s not possible to have an economic expansion without also having the raw goods to fuel that expansion. So then the question simply becomes: is a global economic expansion likely? The answer to that is, of course, yes.

The World is Growing

China’s growth is still there. No, seriously. Even during the recession, China is growing. George Soros and Jim Rogers are both predicting that in the next 3 decades, China will easily surpass us in economic strength. That’s long-term growth.

Plus, India is growing at mind-numbing speeds as well, along with other Asian economies. Japan seems to be showing signs of eventual recovery from their own financial crisis during the 90s.

And, while I don’t think the US economy will recover on anything near the scale of the above economies, if you think over the next few decades the US economy is going to recover, then you essentially have a “sure thing” in terms of economic growth. The world’s getting bigger.

Specific Stuff to Buy

This the trillion dollar question — literally. Picking the right commodities is always going to be a pain. Some investors are going with generic commodities ETFs or ETCs, because index funds are a great way to invest in a general market rather than smaller sub-markets.

Personally, I’m a fan of investing in an increase in demand for commodities through the following means:

• Farmland. People need to eat. Buy the source of their food and you’ll never starve yourself. Plus, farmland provides a consistent income rather than just speculative risk.

• Dividend Stocks. Buy stocks that pay a dividend, like mining stocks. This way you’ll make money indirectly from the commodity bull market, while also getting a fairly comfortable income while minimizing speculative risk.

If you’re a fan of metals like gold and silver, then check out my mining stocks website, a new site that focuses on metals, natural resources, natural gas, oil, and other minerals and metals. Don’t miss it.

This is Just the Beginning

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Tags: commodities, commodities trading, etc, etf, index funds
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