The Commodities Investor – A beginner’s Guide to diversifying your portfolio with commodities
Any investor would be well-advised to devote a part of their portfolio to commodities. Whether it be a position in oil and industrial minerals to take advantage of a booming world economy or an interest in gold and silver when fears of inflation or economic turmoil spook the markets.
The focus of The Commodities Investor is on how to successfully diversify a portfolio of investments through a selective holdings of commodities. After a brief overview of the relationship between commodities and other asset classes and the various ways to invest in oil, gas or industrial minerals the book outlines the key factors to consider before purchasing a security linked to a metal or agricultural commodity.
As with all books from Harriman House, the title offers a superb introduction to issues such as the historical performance and demand and supply considerations of individual commodities. Individual chapters detail the investment case for oil and gas, precious metals (gold, platinum, palladium, silver), industrial metals (aluminium, copper, zinc, nickel) and agricultural produce (corn, soybeans, wheat). Handy summaries are also included at the end of each chapter for reference purposes alongside brief comments on the outlook for each commodity and details of the Exchange Traded Funds and key data needed to make an investment.
One of the book?s strengths are the useful pointers about the relationship between the prices of different commodities. For example while silver and gold prices generally mirror each other, demand for silver is more closely tied to industrial uses while gold is affected by seasonal demand for jewellery and investor perceptions of geopolitical consideration and risk. Other useful tidbits include the three Fs affecting demand for corn and soybean: food for humans, food for animals and fuel for automobiles.
However, it would be careless of us not to point out that The Commodities Investor rather puzzlingly misses a few issues that would have made the book a much more complete guide. For one it ignores three important commodities: iron, diamonds and potash. Furthermore we feel that the author would have done well to provide a more detailed listing of the main countries and companies that are crucial to the supply of the minerals covered. Finally, while the book succeeds in giving a sense of how economic cycles affect the prices of the above commodities it would have also benefited from charts comparing commodities to each other. This would have been a good substitute to the rather unenlightening understanding of price trends presented by a 10-year chart of each commodity against the ftse 100.
To sum it all up, The Commodities Investor would be an ideal gift for someone looking for an insight into metals and minerals and would acts as a great reference book for any investor. Despite having some flaws this is a great first read and would set up a good base from which to access more advanced books such as Michael Coulson?s Inside The Mining Sector and Philip Crowson?s Mining Unearthed which are the must reads for serious investors. Definitively worth a look.
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