As a business owner, you know that your portfolio needs to be diversified. This allows you to invest in different areas and avoid the risk of putting all of your eggs into one basket. Experts agree that diversifying is your best approach to building an investment portfolio as an entrepreneur.
Diversification reduces risk and maximizes returns. While certain risks, such as systemic risks, cannot be avoided, unsystematic risks like commercial or financial risks can be hedged.
Diversification can assist an investor in managing risk and reduce price volatility. Remember that no matter how well diversified your portfolio is, risk will always exist.
If you haven’t already, then adding commodities to your portfolio can help you to maximize your returns. Most business owners tend to invest in other businesses or their sector, which can be a great option, but you shouldn’t overlook commodities.
The three top commodities to invest in are detailed below.
The gold market is dynamic and expanding. It’s utilized in jewelry, technology by central banks and investors, giving it a global market. Gold has long been a safe investment and inflation hedge. Gold prices rise when the U.S. currency falls.
Gold, like crude oil, rises in price when demand increases. Costs also fluctuate when central banks opt to diversify their monetary reserves by purchasing more gold.
Unlike crude oil, investors can physically own the product. Those seeking actual gold can buy gold bullion bars or coins from Modern Coin Mart. But this requires paying for a safe deposit box, vault, or other secure storage.
Investing in actual crude oil isn’t as simple as buying other commodities. Investing in futures is the most direct way to buy the commodity outright. But futures are risky and need a lot of funds and knowledge, meaning it isn’t always the best option for new investors.
Investors can buy oil company shares, crude oil mutual funds, or ETFs. These are easy to find since they trade like stocks. Other alternatives include mutual funds or ETFs that invest directly in oil business stocks. These options have reduced risks due to their greater diversification.
Metals used in commercial and industrial applications such as construction and manufacturing are base metals. Zinc and copper are examples of base metals to invest in; copper especially is a good investment for 2021.
Because they are easier to find and supply, their prices are lower than precious metals. However, rising worldwide demand, especially from China and other developing nations, supports prices along with increased base metal applications.
Because of their prices, investors would have to hold large amounts of aluminum, zinc, and copper to profit. Instead, investing in base metals firms like Alcoa or U.S. Steel can help you get a foot in the door. Holding ETFs like the SPDR S&P Metals & Mining ETF exposes you to metals and mining firms.
Of course, other commodities exist for you to invest in. If you prefer to own physical products, high-end designer watches such as the Patek Philippe Grandmaster Chime 6300A-010, which sold for $31,19m, will always be an excellent investment, as will art stored and carefully documented in a collection.