As a volatile 2022 comes to a close, many investors are in a defensive crouch, trying to protect their portfolios from the next market downturn. One of the biggest challenges for investors is to find an investment that can provide stable returns over the long term. To do this, investors need to understand the different types of investments and how they perform in different market conditions.
One of the most volatile investments of the last 90 years has been commodities. Commodities are raw materials that are used in the production of goods and services. Some of the most popular commodities include gold, silver, oil, and agricultural products like corn and wheat. These commodities are typically traded on futures exchanges, which means that investors can buy and sell contracts for future delivery of these products.
Volatility is a measure of how much an investment's price fluctuates over time. Commodities are known for their high levels of volatility, which can be attributed to a number of factors. These include changes in supply and demand, geopolitical events, and shifts in currency exchange rates.
Investors who are looking to invest in commodities should be aware of the risks involved. Commodities can be highly volatile, and prices can fluctuate rapidly in response to changing market conditions. As a result, investors need to be prepared to monitor their investments closely and be willing to make changes to their portfolios as needed.
One way to invest in commodities is through exchange-traded funds (ETFs). These funds allow investors to buy shares in a portfolio of commodities, which can help to spread out their risk. Some of the most popular commodity ETFs include the SPDR Gold Shares (AMEX:GLD), the United States Oil Fund (AMEX:USO), and the Invesco DB Agriculture Fund (AMEX:DBA).
Another way to invest in commodities is through individual stocks. This can be a risk approach, as the fortunes of individual companies can be closely tied to the price of a particular commodity. However, if investors are willing to do their research and are comfortable with the risks involved, investing in individual stocks can be a way to potentially achieve higher returns.
In addition to commodities, other investments that are known for their volatility include stocks, bonds, and real estate. Stocks are often seen as the most volatile of these investments, as they can be influenced by a wide range of factors, including economic trends, company earnings reports, and geopolitical events.
Bonds, on the other hand, are typically seen as less volatile than stocks. However, they can still be affected by changes in interest rates and credit ratings, which can impact their performance. Real estate is also known for its volatility, as prices can fluctuate based on a variety of factors, including local market conditions and changes in interest rates.
Investors who are looking to build a diversified portfolio should consider investing in a mix of these different types of assets. By spreading their investments across different asset classes, investors can potentially reduce their overall risk and create a more stable portfolio.
In conclusion, commodities are one of the most volatile investments of the last 90 years. While they can offer potentially high returns, they also come with a high level of risk. Investors who are considering investing in commodities should be prepared to monitor their investments closely and be willing to make changes to their portfolios as needed. Additionally, investors should consider a mix of different asset classes to create a more stable portfolio over the long term.
