Why do you choose commodities instead of shares?

[merlinnn]

Hi Everyone,

I'm still chipping away at my investment journey and am curious as to why some choose commodities over shares or currency. Interested to here from traders and their experiences.

 

[burglar]

Hi Everyone,

I'm still chipping away at my investment journey and am curious as to why some choose commodities over shares or currency. Interested to here from traders and their experiences.

They are different bets.

With commodities you are betting on supply and demand.
With shares you are betting on a company, as an investor.
Or betting on investors, as a trader.
With currency, I am not sure ...

I was told to read a lot and find out what was of interest to me!

 

[hhse]

Hi Everyone,

I'm still chipping away at my investment journey and am curious as to why some choose commodities over shares or currency. Interested to here from traders and their experiences.

* No business risk
* Uncorrelated vs other positions
* Pairs Trade
* Opportunity (high volatility)

 

[merlinnn]

Would it be fair to say that fundamentals play a larger role in the commodity market?

Can you still apply systematic trading rules to commodities or is discretionary based?

 

[Value Collector]

Would it be fair to say that fundamentals play a larger role in the commodity market?

Can you still apply systematic trading rules to commodities or is discretionary based?

When you try and profit from trading commodities, you are basically hoping that in 10mins / tomorrow / next week / next month that some one will come along and buy the commodity from you at a higher price (if your long) or sell it to you at a cheaper price ( if your short)

the under lying principle is that your not looking to the asset itself to generate a return, your looking to other people to buy or sell it to you for a price that makes you money. I guess short term trading in equities is a similar thing.

But when it comes to investing, your looking at the asset itself to generate a return, if you own a farm, a house or any business, your looking at the return the asset is likely to produce over the coming years to justify the price you pay for it, If you have a farm and it produces X amount of corn per acre each year on average then you will be happy, your not going to look at the price of the farm every day, your going to keep an eye on the farms production and make sure everything is running smoothly and returns are as expected,

So fundamentals play the largest role in investing.

 

[Wysiwyg]

But when it comes to investing, your looking at the asset itself to generate a return, if you own a farm, a house or any business, your looking at the return the asset is likely to produce over the coming years to justify the price you pay for it, If you have a farm and it produces X amount of corn per acre each year on average then you will be happy, your not going to look at the price of the farm every day, your going to keep an eye on the farms production and make sure everything is running smoothly and returns are as expected,

So fundamentals play the largest role in investing.

This paragraph is pleasing to read.



except for the you are (you're)

 

[Smurf1976]

The longer the timeframe, the greater the importance of fundamentals.

For example, the average price of oil over the next 30 years will likely be a reasonable reflection of the underlying market fundamentals. But the price could do literally anything over a shorter time, witness the recent plunge as an example of that. So over the long term the price should reflect fundamentals, but on any particular day it may be double or half that amount.

Same with equities. If your plan is to buy and hold for a decade then it's largely the fundamentals of the business that will make (or lose) you money. But if you're looking at charts and day trading then the underlying business isn't really relevant at all.

Same concept with anything really, even natural things like weather. It's not unknown for Melbourne to be hotter than Darwin for short periods, although on average the reverse is true. Live there for 10 years - it's the fundamental climate which matters. Visit for a few days - anything could happen. Same concept with markets.

 

[Value Collector]

This paragraph is pleasing to read.

Well I can't claim it as an original thought, I swiped the concept from Buffet (But I guess that's ok, he swiped a quote about speculation in the video below from Ben grahams book "the intelligent investor")

Watch this vid from the 2min mark for the oracles wise words ;-)

 

[AverageJoe]

Well I can't claim it as an original thought, I swiped the concept from Buffet (But I guess that's ok, he swiped a quote about speculation in the video below from Ben grahams book "the intelligent investor")

Watch this vid from the 2min mark for the oracles wise words ;-)

Does Buffet buy commodities especially physical Gold?

 

[The Falcon]

Google Buffetts thoughts on gold.

 

[Value Collector]

Does Buffet buy commodities especially physical Gold?

No, He prefers to put hold assets that are productive, that produce cash and there fore allow the purchase of more assets, gold doesn't compound.

 

[AverageJoe]

No, He prefers to put hold assets that are productive, that produce cash and there fore allow the purchase of more assets, gold doesn't compound.

So buffet doesn't think the US economy will implode by the shear size of their debt?

That is not what I hear constantly from gold bug. As paper gold drops those warnings get louder by the day.

 

[Wysiwyg]

Well I can't claim it as an original thought, I swiped the concept from Buffet (But I guess that's ok, he swiped a quote about speculation in the video below from Ben grahams book "the intelligent investor")

Can't watch the video due to third party copyright infringement notification. Look for a law suit to follow up.

 

[Value Collector]

So buffet doesn't think the US economy will implode by the shear size of their debt?

That is not what I hear constantly from gold bug. As paper gold drops those warnings get louder by the day.

Gold bugs are half right, they are right not to trust the value of paper currency over time, however they are wrong in thinking the best answer to inflation risk is to hold your wealth in bars of unproductive metals.

Most non cash assets offer the same inflation hedge as gold over the long term, eg real estate, farmland, railways, factories, great brands etc etc, except them also produce income every year, that allows you to buy more productive assets,

Compounding is the key to wealth creation, buffet started with $10,000 in 1950, if he put that into gold then today he would have $700,000 but he didn't he bought businesses, and today is worth more than $50,000,000,000.

 

[Value Collector]

Can't watch the video due to third party copyright infringement notification. Look for a law suit to follow up.

You tube has just canceled the original uploaded account because of too many copy right infringements, whether his video that I link as an infringement I am not sure.