A very common but often overlooked investment vehicle can be found in the commodity futures markets. Many studies have shown a diversified investment portfolio, which includes commodity futures, will perform better than a portfolio made up exclusively of stocks and/or bonds.
In times of an economic recession or adverse market conditions, commodity futures can provide investment opportunities as well as alternatives to investing in a dropping stock market.
As an example, in certain economic downturns, commodity prices tend to rise. Commodities such as Sugar, Coffee, and Crude Oil will typically see a rise in prices during the onset of an economic downturn. Commodities such as Soybeans, Gold, and Live Cattle tend to rise towards the end of a poor economic cycle.
Overall, the agricultural markets tend to be the most beneficial markets to invest in or trade in during recessionary times.
Another way savvy investors utilize commodity futures is to trade stock index futures to either hedge their stock portfolios and/or outright speculate by taking short positions. Unlike the strict regulations found when shorting or day trading stocks, commodity futures have no such restrictions.
Short positions may be entered just as easily as Long positions. Additionally, the $25,000 account minimum requirement for day trading stocks does not apply to commodity futures trading nor are there any additional trade limits or regulations (outside of the normal commodity futures margin & CFTC position reporting requirements).
When inflationary times arise, we may see a rise in precious metals such as Gold, Silver, and Platinum among other select commodities.
Insignia Futures & Options has the experience and expertise to assist you in a well-rounded investment portfolio. Contact Us at our offices today to discuss the benefits of investing in commodity futures.