Investing in Commodity Mutual Funds through Financial Experts - dummies

Investing in Commodity Mutual Funds through Financial Experts

A common way for individuals to invest in commodities is through a mutual fund. Because you’re relying on a trained professional to do the investing on your behalf, commodity mutual funds may be the simplest way for you to get involved in the commodities markets.

There are many different types of mutual funds that have nothing to do with commodities. You can invest in stock funds, bond funds, currency funds, and even country-specific funds. But a number of mutual funds specialize in investing in only commodities or commodity-related products.

Plain vanilla funds are your run-of-the-mill funds. If you’ve ever invested in a mutual fund, you should have no problems investing in these straightforward funds. How do you get started? You write your check and purchase shares of the mutual funds either through your broker or directly from the fund providers, and voila! Of course, you should ask a number of questions before writing your check.

Plain vanilla funds are actively administered by a fund manager whose responsibility is to allocate capital across various sub-asset classes in order to maximize the fund’s returns. Generally speaking, these mutual funds invest in commodity-linked derivative instruments such as futures contracts and options on futures traded on the major commodity exchanges in New York, Chicago, and elsewhere. Others may also invest in companies that process raw materials, such as energy companies and mining companies.