There are a few different options for retail investors when it comes to gaining exposure to commodities. One of the riskier, though more direct, approaches is to purchase futures contracts. Given the risk and volatility of these types of securities, average investors are likely to do better with a different approach, such as investing in the stock of companies involved in the commodity markets.
This could include buying stock in mining companies, energy companies or agricultural companies.
The downside to this approach is that an investor loses some of the diversification advantages, since the company's stock price is subject to other macro-economic factors. Most retail investors would do better by looking at diversified commodity exchange-traded funds, which track one of the broad-based commodity indexes.
There are many reasons to consider adding commodities to a portfolio. Taking the time to explore your options now can mean added diversification, lower risk and solid growth opportunities for your portfolio later.
— By Chris Gaffney, president of the World Markets division of EverBank