Investors
continue to seek new opportunities beyond traditional equity
offerings, but there have always been barriers to their participation
in commodity markets. A general lack of understanding, inefficient
access, and high agency costs for commodity investments are the
reasons why investors look for opportunities in more traditional
asset classes. However, these barriers are quickly disappearing, and
commodity investments are beginning to be considered mainstream
investments.
Commodities
have been available to investors for decades, but why has their
popularity grown so rapidly only in recent years? The appeal is
attributed to a variety of conditions, all of which will make
commodity trading as
simple as buying and selling stocks, if it hasn't done that to some
degree already. Here's why:
- Well-known media outlets provide heavy coverage of commodity prices
- Certain commodities are affected by geo-political risk and natural catastrophes, and are therefore newsworthy
- Investors want to diversify their portfolios into non-equity asset classes
- Data has become cheaply and readily available
- Brokerage provide extensive research coverage
- Online brokerage firms are expanding into futures with reduced commissions
Until
recently, the only way for most individual and institutional
investors to quickly access the commodities markets was to purchase
stocks that focused on specific commodity sectors. That strategy was
made much more efficient with the arrival of ETFs, which hold baskets
of stocks in specific sectors. This is just one of the many factors
that has facilitated the emergence of COMEX
trading and its rise to popularity over the recent years. But
while there may be dozens of commodity-based funds and index options
listed on exchanges over the next few years, let's not forget
old-fashioned futures - the instrument of choice among hedge funds
all over the world, as well as the core holding of many of the new
commodity-based ETFs.
For
more information, please visit: www.masiatrade.com
