Commodities have historically been an excellent way to protect your portfolio against inflation and volatile equity markets. Even though the markets are currently in a correction, investors who remain diversified are still reaping the benefits of commodities as a hedge.
However, there are different ways to invest in commodities depending on your risk tolerance and available capital. If you’re looking for an excellent place to park some cash but don’t know where to start, here is a look at some solid options for investing in 2022.
Oil is one of the world’s most widely traded commodities and has been a part of the global economy since early in the 20th century. Crude oil is a product used widely in many industries, including transportation and the production of many other commodities. Historically, oil has positively correlated with economic growth and stock market performance, which makes it an attractive investment. In 2022, the global economy is expected to grow significantly faster than it has in recent years. There will be greater demand for crude oil with more activity, driving prices higher. It’s worth noting, however, that the oil market is highly volatile. While the general trend is upward, there will be periods of significant decline.
The age-old precious metal has many suitors, but gold has proven to be a reliable way to diversify your portfolio. Like oil, gold is a necessity; it is in high demand worldwide. This is why gold prices often fluctuate with the economic cycle. Additionally, as gold is used as a hedge against inflation, it also tends to perform well in times of stock market volatility. It is not uncommon for gold to increase in value during a correction. However, gold often loses value against stocks when the economy is booming. This is why it is essential to have a well-diversified portfolio that includes gold.
While it may seem odd to include watches in a list of commodities, they are a great way to diversify your portfolio. While the price of gold will always go up due to its innate value, the cost of watches is mainly dependent on the whims of fashion. By investing in high-quality wristwatches, you are protecting yourself against inflation. Plenty of online retailers, such as Chrono24, offer a wide range of pre-owned watches that you can purchase at a fraction of their retail value. Just do proper research, find a reputable dealer, and make sure you are well-read on the type of watch to invest in. Top tips for building a watch collection that will increase price include using a consultant such as Eric Brahms to find out how to start your collection and make sure you stick to the same retailer such as Rolex or Philip Patel.
Copper is an essential industrial metal and is used in various applications, including electrical wiring and plumbing. The demand for copper has been increasing over the years and is expected to increase further in the coming years. This metal is expected to see an uptick in demand in 2022 due to the anticipated increase in infrastructure spending. According to the International Copper Study Group, the global demand for copper is expected to grow at a CAGR of 1.8% from 2018 to 2022. The demand for copper is expected to be higher in emerging economies such as China, India, and Brazil.
The Silver Institute estimates that the global supply of silver in 2021 will reach 1056.20 million ounces, representing year-over-year growth of 8.20 percent, while the demand for silver will climb by 15.29 percent, reaching 1033.10 million ounces. In 2021, the amount of silver used on a global scale rose by 15.29 percent year over year, reaching 1033.10 million ounces. This is in contrast to the 9.98 percent year-over-year reduction seen in the previous year.
Investing in commodities is an excellent strategy to make money in the short- and long-term. Commodity cycles have been predictable over the last few decades and are expected to be the same in the coming years. The commodities recommended above are expected to perform well in the long term. Investing in these commodities makes sense, given the current economic climate. Keep in mind that there will be ups and downs along the way. But if you are invested in these commodities for the long term, you are likely to make good money from this investment strategy.