Considering Commodities? Here’s Your Checklist of the Crucial Essentials
When we consider what can be defined as an investment, we might typically consider how much financial value that particular item or asset will ultimately bring us. It might be that something we have purchased in the past appreciates over time, allowing for a significant profit margin once it has been sold on for a price that exceeds the previous one.
Or it might be that possession of the product provides continual cash flow, which is beneficial to our economic position, no matter how much it might yield. This could be in the form of rental income or sub-earnings collected from service user fees. Therefore, the core definition can be found in the measure of its economic potential rather than the specific product choice itself.
Considering investing in commodities in the near future? Here’s what you need to know:
Investment versus speculation.
Commodities are essentially items of one kind that have been purchased or invested in at any given point. From the moment of sale, they become a commodity to the owner to sell or profit from where they see fit. Suppose something can only be profited from by selling it for a higher price (rather than offering profit from ownership). In that case, it is ultimately termed as a speculative commodity.
Certain commodities are short-lived.
I think we can all recall the thrill of the beanie baby craze along with the hysteria that surrounded specific collectable action figures. Desirable items created to entice a particular market are notorious for churning out responding commodity items. Significant returns have been enjoyed by investors who have chosen the right moment to buy and sell. However, these items can lose their value literally in hours as trends alter. What might be worth $100 could be worth pennies the next.
Your home is likely your greatest commodity.
As much as some of us may like to romanticise the concept of our homes being ‘worth more than money, this is not the central financial view of things. Regardless of the sentimental value we may attach to the spaces within which we spend our time and energy, for most people, a house purchase is one of the most significant commodity investments they will make in their lifetimes. This is true irrespective of personal wealth or salary size. The more one earns, the more one is likely to spend on the home itself.
Your home can become an investment.
Even temporarily, if you rent out your home, it can become an investment rather than a speculative commodity. By gathering fees from holiday stays, short-term lettings or even hiring the space as a film set, you can hope to cash in on the commodity that you have in your possession. Those who travel out of town often or who have several properties in their commodity portfolio are an excellent route of potential profit in both the short and long-term future.
Invest in things you love, not what others might.
By following the popular crowd, you are not likely to see the kind of financial payback you might be hoping for. Such as in the earlier mentioned popular toy collectables and even more specifically in the case of investment in art pieces. Standing in a gallery asking everyone else what they love will not develop your sense of self or investment instinct. Fine-tune your financial choices based on research and a sense of confidence in your convictions. Following along is not a viable investment pursuit.
Hard assets don’t come with solid guarantees.
For some investors, valuable metals such as Gold are preferable choices. They appear to offer more tangible value than the paper currency, which might appear changeable or ultimately replaceable. You can print more money, and it is essentially just a paper promise of value. On the other hand, Gold is a reassuringly weighty block of a commodity that can be exchanged for money at a time that suits you. The issue? Gold value changes all the time. Therefore, you need the right experts nearby to help you make wise asset-buying decisions as you progress forwards.
There is an exception to every rule.
The world’s wealthiest individuals did not create their fortunes based on stepping safely or holding back from making bold economic choices regarding commodity buying. Suppose you want to make a decent profit from investment ventures of any kind. In that case, a sense of confidence is necessary to the journey as a whole. However, there is a significant difference between poorly researched impulse buys and knowledgeable choice-making. Ensure you are the latter of these two options to maximise your chances of success.
Fundamentally, any investment made needs careful consideration that is both informed and appropriately researched. Many investors mistake trying to go it alone based on false beginner confidence or ‘hear say’ figure predictions. To eradicate any potential unnecessary losses and the resulting anxiety it causes, enlist the support of financial experts who can guide you in the right direction for your particular situations and economic aspirations.
Commodities can be an excellent way for you to expand your financial portfolio without too much added risk depending on the type of investment you choose to make. You can start small with low-scale buying options or even share the investment with another individual. Work to your knowledge area and confidence level, gradually adding investment options as you become more experienced and knowledgeable in the area you are interested in.
Oh, and remember—every investment success story started with an excellent informant team behind it!