If inflation is increasing, it seems sensible to invest money in real things that are needed for life and that cannot be created on a printing press by the U.S. Bureau of Engraving. Commodities are natural resources: products of mines, forests and farms that are used to make things that people want. In recent years, it has become easy for individuals to invest in commodities through buying mutual funds or shares on Wall Street.
One of the advantages of living in a natural resource-producing state like Idaho is seeing how commodities are priced and how the markets for them behave. Idahoans have seen boom years in resource prices which are followed by years, sometimes decades, of depressed prices. But there is no doubt that the world’s people will seek more food, fuel and conveniences of living as time goes on. Commodities will become more valuable over time—the average investor is wise to look at them as long-term investments. Spreading purchases out over several years with dollar-cost averaging is one way to avoid getting burned in commodity investments.
To buy commodities one portion at a time, consider exchange-traded funds (ETFs) or mutual funds that specialize in exposure to commodities. Examples include
EXCHANGE-TRADED FUNDS AND NOTES
PowerShares DB Commodity Index Tracking (DBC)
iPath Dow Jones-UBS Commodity Index Total Return (DJP)
iShares S&P GSCI Commodity-Indexed Trust (CSG)
COMMODITY SECTOR MUTUAL FUNDS
Fidelity Select Natural Resources (FNARX)
Harbor Commodity Real Return Strategy Fund (HACMX)
PIMCO Commodity Real Return Strategy (PCRDX)
In the gold rush days, it was said that people made more money selling picks and shovels than digging for gold. In similar fashion, consider stocks of companies that build the equipment needed to produce commodities: farm tractors, mining machines and the like.