What Are Commodity Mutual Funds?
What are Commodity Mutual Funds? Commodity mutual funds are mutual funds which in some form comprise investments in commodities. Commodity funds are relatively newer to the market than some of the more standard funds, yet they offer an interesting avenue for investment to outpace inflation. Commodities are a common investment form and can consist of a variety of components but are in theory limited to things which can be taken from or produced on the earth. They include, but are not limited to:
Pork bellies
Precious metals
Oil and gas
Corn
Coffee
Sugar
The list of available commodities goes on to include many more items, but they share common characteristics. Commodities are traded in two general fashions, options and the spot market. The spot market is defined as trades taking place in real-time with payment and delivery of the commodity immediate. The options market, the place where the majority of investors look, means trading on futures of commodities. Future prices of a given commodity, usually traded on margin, traded for potential profit before delivery takes place. Commodity mutual funds can consist of either the spot market or futures, but most utilize the latter.
How Commodity Mutual Funds Work
Commodity funds operate very similarly to regular mutual funds; it’s where they invest, the commodities market, which defines them. Commodities as a whole are used most prevalently to hedge investment portfolios against inflation. Inflation, the value of what a dollar can buy dropping, is what often minimizes stock market profits. Commodity funds are managed in the same way as mutual funds, with a professional manager making decisions on where to invest the capital. Commodities funds can be excellent means to lower exposure to inflation while capitalizing on a large and very liquid market. Some well reputed commodity mutual funds which consistently show respectable earnings:
Oppenheimer Real Asset Fund
Goldman Sachs Commodities Index
Deutsche Bank Liquid Commodities Index
Rogers International Commodities Index
Dow Jones AIG Commodities Index
Related posts:- How To Invest In ETF Mutual Funds?
- How To Invest In Gold Mutual Funds?
- How To Invest In Index Mutual Funds?
- What Are Mutual Funds?
- What Are Funds?
Leave a Reply
|
