Comments on: Review: The Little Book of Commodity Investing

By: sluggo

sluggo — Mon, 15 Nov 2010 14:02:18 +0000

Just like Andrew said, the potential upside and downside is tremendous due to the leverage.
Be careful people, only risk what you are willing to lose and trust no one. Because this is a way to make a ton of money quickly, the business attracts a ton of sleezy characters.

By: Andrew

Andrew — Mon, 15 Nov 2010 13:29:01 +0000

First off, I’d like to say that I think it is great to see a review for an investing book that is not about index investing. I know it is a popular philosophy amongst personal finance blogs, but thank you for at least providing a resource to those who want to take a more “hands on” approach.

As for trading commodities, it can be a VERY lucrative practice if done correctly, however, it certainly is not for everyone. You are able to “buy” commodities by only putting up a percentage of the amount you control with the contract. A crude example would be paying $10,000 to control $100,000 of gold or whatever commodity your trading. The $10,000 is the margin you’re required to post; it’s sort of like collateral for owning the $100,000. By doing this, you are creating tremendous leverage that can pay off big if you’re right, but leave you very stressed and broke if you’re wrong.

You need a lot of money to trade commodities effectively. Position sizes should be kept small and reasonable, and care should be taken to not extend yourself beyond your financial means. Perhaps more quick fortunes have been made in the futures markets than any other market, but that is definitely the exception, not the rule.

By: almost there

almost there — Sun, 14 Nov 2010 21:18:20 +0000

Vanguard has ETF & mutual funds in the subject. Buy long term and forget about it by dollar cost avg.VGENX is an energy find of theirs.

By: S01

S01 — Sun, 14 Nov 2010 20:25:16 +0000

Great post Trent, Commodities is one of the area’s I’m a little grey/fuzzy on as well, so thanks for the overview. Sounds like the book is a good one to start with to get a basic handle on commodities, might have to see if I can pick a copy up or at least dredge one out of the library :).