In one of our previous blogpost we already discussed several different ways to invest your money. One possibility is investing in raw materials. This way of investing has become more popular in recent years. But what does this way of investing actually entail?
Investing in in raw materials requires you to buy the raw materials to later sell them with a profit. There are two possibilities: you can choose to invest in physical commodities or in futures with raw materials as underlying asset. The resources you have invested in will not be sent to your home, but are represented by a proof of value. The owner of the resources is indicated on the proof as well. When investing in gold, silver or diamonds it is possible to have your resources in your possession. These are usually kept in a vault.
Why should you choose raw materials?
Investing in raw materials has several benefits:
- Raw materials are safe, even during crises or inflation.
- Prices generally remain stable.
- Raw materials are the perfect addition to a diversified investment portfolio. Raw materials remain profitable, even when shares and obligations are running low.
- The prices are on the rise because of the growth in the Asian market. China and India both know a high demand for raw materials due to the development of their market. The more countries that develop in emerging economies, the more profit can be made from raw materials.
Types of raw materials
There are raw materials in all sorts of shapes and sizes. The most popular resources are gold, silver, diamond, oil, natural gas, platinum and copper. There are, however, many more possibilities, such as coffee, sugar and grains.
Yield from investing in raw materials
The yield is, of course, largely dependent on the price trend of the resource or future. Investing in raw materials thus amounts to speculating regarding the price trend of your raw materials. A raw material is bought at a lower price and sold for a higher price. The yield thus differs per raw material.
Regarding the investment in diamonds, for example, indicators show that the diamond prices will keep on rising in the oncoming decennia. This has several explanations:
- The demand for diamonds from the BRIC countries keeps growing.
- The supply of diamonds stays stable, since there have no new diamond mines been discovered recently.
- They are easy to maintain.
- Usually, no taxes are levied on its surplus, which makes investing in diamonds very interesting.
Raw materials can thus become an appealing investment product, due to its scarcity or its economic trend and are thus something to consider for your investment portfolio.