Reading the Financial Pages for Dummies®

Chapter 13. Making Money from Commodities

In This Chapter

• Understanding how commodity markets work

• Making sense of the statistics

• Investing in oil, food, copper – and uranium!

A few years ago, only the very bold, the very skilled, and the slightly unstable ventured into the commodities markets. Their pricing patterns were so hard to forecast (or so some people believed) that they could spell death to any portfolio that was unwise enough to include them.

These days the commodities markets have been tamed to the extent where they can provide a useful counterpoint to the hurly-burly of the stock markets. And the arrival of new investment tools such as Exchange-Traded Funds has made it as easy to invest in copper as in Marks & Spencer.

Introducing Commodities

Companies are familiar, because everyone knows what they do, and pretty well anyone can see what makes a good one different from a bad one. Savings accounts are the same: you can feel reasonably sure that what you see is what you're going to get. You're going to lend somebody your money, and he's going to return it with interest, or some other form of agreed payback.

But you enter a different sort of game when you start working with commodities. Put simply, one pile of iron ore looks very much like another pile of iron ore, and surely only an expert can tell you which one's worth a lot of money and which one's just so much scrap? Since I'm not a geological expert, and probably neither are you, surely you're going to be on your own in the ...