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13 July 2011

Should we invest in Commodities or Resources? (July 2011)‏

Unlike real estate, assets type such as commodities and resources investments tend to be highly volatile. This kind of assets classes is suitable for high risk takers. Knowing the characteristic of the assets classes is important to suit your investment objectives so that a correct investment decision was made. However, I noticed that many investors confused about Commodities and Resources, and they often lumped them as SAME. Is it true? Let's look at it separately (not together).


Commodities vs Resources?
Yes. Both is similar, yet there are some differences between them. First, let's talk about commodities. Commodities for me were comprised of metals such as copper, iron ore, silver, gold, platinum... Although many of us includes energy assets such as oil and gas into it, we can categorize it as an asset class which we can't consume with our mouth. Sometime, it was called hard commodities.

Meanwhile, Resources are soft commodities. They comprises agriculture products and food, etc sugar, corn, wheat, soybean, palm oil... These are closely linked with our food and beverages. After understanding the basic of these two assets, let's us examine the next question.




Should we invest in Commodities or Resources now?
In view of the current scenario, I prefer Resources rather than Commodities. Why? Demand for wheat, rice and other resources tends to be more sustainable. Even if the global economy is going to slow down, we still have to eat or consume as it was a necessity.

Other than that, bad weather (due to global warming?) and natural disaster (due to end-of-the world?) had disrupted the supply of resources. Although commodities such as coal mining in Australia was affected too, food do more harm to human being. Without adequate resources, people may trade commodities for resources!!! Don't you?

What if the current high price of commodities was driven up by speculation? Even though demand and supply play their role here, but speculation and traders tend to make profit from the game. By manipulating the demand-supply story, they're in to drive up the prices, making it more pricier rather than purely based on the fundamental.

After all these points highlighted, would you invest in Commodities or Resources?


3 comments:

  1. both them i consider as fix asset

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