Investing in the commodity that grows on trees.
Are you looking for a new investment opportunity but don’t know where to begin? Try a commodity! A commodity is a basic good that is a raw material or agricultural product that can be bought or sold. This includes metals, water, energy, and food products like corn and grain.
Raw materials are a nearly sure-fire way to protect yourself against inflation. Trading commodities has a long history, much longer than stocks and bonds. The economies of ancient civilizations were based on trading materials. Today commodities can be a great way for investors to grow their portfolio or protect themselves from inflation.
One of the most popular commodities in which to invest may be right under our noses… on our plates. The food and agriculture sector can offer great returns. Agriculture is the practice of farming, which can include raising animals, for both food and otherwise, and cultivation of soil.
Like water, everyone needs food and agriculture, which explains the rise in investment opportunity over the past decade. Also, what better way to know where your food comes from than by getting involved yourself.
Continue reading to explore why and how you can tap into this industry.
Investing in Commodities
Commodity investing involves putting your money into raw materials that are either consumed directly, like food, or used to create other products, like precious metals. Energy sources and natural resources are considered commodities.
Interested investors can invest in commodities in many different ways, like in physical raw form or using future contracts of ETPs that track a commodity index. Mutual funds are also a viable way to invest in commodities. Buying shares of a company that profits from the value of a natural resource is a great way to invest in a commodity.
Commodities can be utilized for diversification, to hedge against inflation, gain returns, and more.
While agriculture has been around since the beginning of civilization, it continues to be a growing asset class and can act as a significant part of any portfolio. How can you deny the power of food and agriculture? Whether we are in an economic boom or recession, we still need to grow and eat food.
Between 2005 and 2017, the number of funds operating in the food and agriculture sector rose from just 38 to over 440. The funds manage nearly $73 billion in assets, between both private and institutional investors. This is predicted to increase as populations grow and economies become more prosperous.
You can see the evolution of the industry when you look at how it is gaining capital. Pension funds and endowments in North America and Europe are some of the major sources of capital.
Another reason you should be looking into agriculture as your next investment is its potential as a long-term investment. If an individual is looking to build long term wealth, agriculture is a way to do that, especially with farmland and timberland. This can provide money for an individual’s own retirement, a later investment, or money saved for their family in the future.
Like real estate, farmland appreciates in value at the same time the crops produce a yield annually. Other crops, like timber, can take a long time to grow and won’t produce anything until they are more mature.
How to Invest in Food and Agriculture
There are many different ways to invest in the food and agriculture sector. Of course, many investors can’t just start a farm. There are easier ways to tap into the sector.
Real estate investment trusts, REITs, are one way to do just that. Investing in farm-focused real estate is the closest an investor can get to owning a farm without actually owning one. The real estate purchased by an REIT is usually leased to farmers to create produce. One of the benefits of this avenue is the diversification. These allow a single investor to invest in multiple farms around the world. They can also be sold on the stock exchange.
An ETF can also allow an investor to gain a diverse exposure to the food and agriculture sector. Many farming ETFs offer access to a set of businesses that derive a large percentage of their revenue from the sector. One thing to think when purchasing an ETF is the management fees that can go along with the fund.
Mutual funds can also allow individuals to invest in farming, through both agriculture-related firms or commodities.
The most obvious way to invest in agriculture is by directly investing into commodities. Through futures contracts, ETFs, and exchange traded notes, investors may take advantage of price changes in the marketplace. Depending on the ETF and ETN, individuals can gain exposure to specific commodities, like corn and livestock, or a basket of commodities.
Alpen Partners and Commodities
Alpen Partners Wealth Management International AG, the sister company of Alpen Partners Wealth Management AG, is now a registered investment advisor at the U.S. Securities and Exchange Commission (SEC). Together with our partner Swiss private banks, our company can now offer the full Swiss private banking experience to American clients, both resident and non-resident.
In terms of precious metals, Alpen Partners has connections with some of the most prestigious banks in Switzerland that have trustworthy reputations for managing wealth and some holding your gold. Connect with us if you have any questions about gold as an investment or need a bank to hold your gold.
If you wanted to explore the power of investing in water, Alpen Partners has developed an extensive network of specialists focusing on the theme of water investing. Our goal is to find the best investment opportunity for you, whether it’s in water or otherwise.