Sunday, January 9, 2011

Commodities to invest in 2011

As per the recent issue of Forbes, Soyabean, Pepper and Copper are among the top preference for investments in 2011. The Soyabean, Pepper and Copper Futures are traded on the Global Markets. However, Copper is also available as an ETF. The Copper ETF is yet to arrive in India.

However, there is a way to invest in these even if you don't want to trade the Futures Contracts. If I was bullish in these, I would go about searching for stocks which would benefit from the prices of these commodities. These again serve as a hedge against inflation. Suppose, you consume Soya Oil/Milk due to certain reason. This means that if the price of Soya Oil/Milk increases, you will be affected unless if you decide to cut on your intake, Under such situations, buying a stock which benefits from the increase in Soy prices, will benefit you or rather hedge you. And it is common that most of the agri commodities are correlated to a certain extent. Hence inflation will definitely push the price of most of these. Without inflation concern, the Equity market would do well (Hopefully). Hence its better to allocate a certain portion of your portfolio into the commodity stocks. ( I allocated some to Sugar and Base Metals.. Very little % of my portfolio though. I consume a lot of sugar.. kidding)

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