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How would one invest in things for example (wheat, oil, gold, silver, platinum) and other commodities? Does E-trade offer a method of doing this?

  • 7
    One does not invest in commodities; one speculates in them. If you don't know much about the commodities markets, I suggest you learn a little about them first: it is not for the faint of heart. – Dilip Sarwate Jan 23 '15 at 20:00
  • please include information about how one could trade commodities online like E-trade. Also any apps/tools that can help with this. Mobile/desktop tools would help. – Patrick W. McMahon Jan 28 '15 at 17:59
  • @PatrickW.McMahon The general question is OK, but requesting specific product recommendations is off-topic. – Chris W. Rea Jan 29 '15 at 4:08
  • As a recomendation I hope you take very seriously: do not "invest" in them. There is a reason they call it speculation in the commodities market. If you absolutely must have exposure to them then buy physical. If you are so set on having it physical you should probably be buying stawks and holding for the long run (15-20) years. Don't bet against the house. – BAR Feb 7 '15 at 6:50
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I agree with QuantK the easiest way is through an investment in ETFs.

The other possibilities are:

  • Buy commodities in the spot market.

    i.e. you just buy the commodity you want and hold on to it. This implies that you will need to store it, which you probably don't. Hence, the next alternative.

  • Futures.

    Investing in futures is not something you should consider without doing your homework first! Futures positions are taken on margin and are thus "bought" with leverage.

    Furthermore, futures contract have a maturity date. This means that you would need to "roll" your position if you want to keep exposure to the commodity. In addition you should note that spot market returns are not necessarily the same as movements in futures returns due to basis risk and differences in timing (futures typically converge to the spot price the closer to maturity but in essence reflect price discovery over time).

    If you want to invest in commodities through taking a position in futures contracts I advise you to become familiar with at least the following concepts: roll returns (backwardation/contango term structures), margin (especially what kind of collateral your broker accepts) and transaction costs.

ETFs typically invest in commodities through one of the above stated possibilities. They either arrange storage or they make sure futures positions are rolled. If ETFs invest through futures your return typically consist of the futures return and the return on collateral (typically some bond portfolio).

There are also other other derivates which you can consider but in the end these are typically linked to futures returns.

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  • If you are not in the USA you can trade CFDs on some commodities. – Victor Jan 24 '15 at 5:33
  • and with less bulky commodities like gold coins its is practicable to store small amounts your self – Pepone Jan 25 '15 at 16:13
  • Could you include some additional notes on if what you said can be done with etrade. Does etrade have ETFs like you have described? – Patrick W. McMahon Jan 27 '15 at 16:24
  • I'm not familiar with Etrade myself, but it seems to me that they offer a lot of possibilities: link. – user24453 Jan 27 '15 at 21:05
  • By definition, an ETF trades like a stock. Any broker will handle these ETFs. – JTP - Apologise to Monica Jan 28 '15 at 18:11
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The easiest and least time consuming way is through etfs. For example, DB argriculture fund. At etfdb.com you can screen multiple funds and select those which are best suited to your preferences.

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  • why is this getting a -2 is this not correct? If this is not correct please correct it I and many others are new to commodities and we should not be steered in the wrong direction. It's costly. – Patrick W. McMahon Jan 28 '15 at 17:57
  • @PatrickW.McMahon Short answers posting links to specific products and/or web sites tend to get downvoted due to their promotional nature. This answer also didn't explain why ETFs may be easier and less time consuming--an explanation that ought to have been provided given the beginner nature of the original question. Votes aren't always about correctness but may also reflect an answer's quality and suitability, among other things. – Chris W. Rea Jan 29 '15 at 4:12

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