Investing in Raw Materials: A Beginner's Guide

Investing in raw materials can be a daunting prospect for a novice investor. What exactly is it and what are its risks? Read on to find out all about investing in raw materials.

Investing in Raw Materials by RobocashPhoto by Etty Fidele on Unsplash 

Are you interested in investing in raw materials, but don’t know where to start? Don’t worry — you’re not alone. In this blog post, we'll provide an overview of what investing in raw materials entails, the types of commodities that are available, and how to find the most profitable investments in raw materials. We'll also discuss some alternative investments that may be a better fit for your individual needs. 

What is Investing in Raw Materials? 

Investing in raw materials involves purchasing commodities such as metals, energy sources (oil or natural gas), agricultural products (corn or wheat), and precious stones (gold or diamonds). These commodities are bought and sold on exchanges like the Chicago Mercantile Exchange (CME) or the London Metal Exchange (LME). When investors purchase these commodities, they are betting on the future price movements of those assets.


The most popular commodities for investment: precious metals, energy, perishables, metals, livestock and agricultural products.

Most Profitable Investments in Raw Materials in 2023

Gold is often seen as a safe haven asset and can offer a good long-term return while oil tends to fluctuate more regularly due to supply and demand factors. 

By keeping track of news related to each commodity and analyzing historical trends, investors can get a better idea of which investments have had positive returns over time and which ones may continue to do well into 2023. 

According to Forbes experts, investments in these companies could be most effective in January 2023 (and possibly beyond):

Company’s Name Commodities
Linde PLC (LIN) Industrial gases: hydrogen, oxygen and nitrogen
BHP Group Ltd (BHP) Metals and minerals: copper, iron ore, nickel, and coal.
Rio Tinto PLC (RIO) Iron ore, aluminium, lithium, copper and diamonds.
Glencore PLC (GLNCY) Metals and minerals: copper, cobalt and nickel and is also one of the largest commodity trading companies.
Vale SA (VALE) Iron ore, nickel, copper, coal and precious metals.
Air Liquide SA (AIQUY) Gases like oxygen, hydrogen and nitrogen.
Sherwin-Williams Co (SHW) Coatings manufacturer.
Air Products & Chemicals Inc (APD) Industrial gases and liquified natural gas process technology and equipment.
Shin-Etsu Chemical Co Ltd (SHECY) PVC plastic materials, silicones and specialty chemicals, like pheromones for pest control.
Ecolab Inc (ECL) Water treatment, purification and cleaning techniques as well as services for food hygiene.

 

Risks Of Investing In Raw Materials 

As with any investment there are risks associated with investing in raw materials which must be taken into consideration before making any decisions. 

The primary risk lies with volatility; commodities tend to fluctuate much more than other forms of investments such as stocks or bonds which means that your capital could suffer huge losses if prices move against you unexpectedly. It is therefore important to understand how these markets work before committing large amounts of capital into them otherwise you could end up losing money quickly.


Additionally, geopolitical events such as wars or natural disasters can cause commodity prices to swing significantly which adds another layer of risk when trading these instruments.  

Lastly, taxes must also be taken into consideration when trading commodities as certain countries may impose additional taxation on profits made from these markets so ensure you understand all tax implications before investing any money here too. 

Alternative Investments: Diversify Your Investment Portfolio 

While investing in raw materials is certainly an option, there are additional investment opportunities out there that may be more suitable for newcomers looking to diversify their portfolios. For instance:

  • real estate investments, 
  • peer-to-peer (P2P) lending platforms where individuals can lend money directly from one another without involving banks or other financial institutions,
  • stock trading strategies, 
  • and even traditional banking products like savings accounts

can all be considered viable alternatives depending on an individual's risk tolerance level. Ultimately, taking advantage of a variety of investment opportunities can help reduce overall risk while still providing potential gains over time.

Would you like to learn more about what is P2P investment? Then watch the video:


Conclusion

Investing in raw materials can be an exciting way to diversify your portfolio and potentially increase your capital over time. However, it is important to understand the risks associated with these types of investments before committing any money. 

Additionally, there are several alternative investment opportunities out there that may be more suited to your individual needs — such as real estate investments or P2P-investments — that can help diversify your portfolio while minimizing risk at the same time. 

Get informed about all the options available to you before making any decisions so you can get the most out of your investment portfolio!

 

Try alternative investments with Robocash:

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Read also:
The best stocks and shares ISA for beginners
How to invest in bonds in the UK
Investment portfolio: examples

* The information in this article is intended for educational and entertainment purposes only and cannot be considered investment advice.


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