Amine Bouchentouf - Investing in Commodities For Dummies

Investing in Commodities For Dummies

Published by: John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, www.wiley.com

Copyright 2016 by John Wiley & Sons, Inc., Hoboken, New Jersey

Published simultaneously in Canada

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Library of Congress Control Number: 2015951693

ISBN 978-1-119-12201-2 (pbk); ISBN 978-1-119-12203-6 (ePub); ISBN 978-1-119-12202-9 (ePDF)

1. Table of Contents

Why are commodities, long regarded as an inferior asset class, quickly moving to the investing mainstream? Good performance. Investors like to reward good performance, and commodities have performed well in recent years. In addition, investors can more easily access these markets: Plenty of new investment vehicles, from exchange-traded funds (ETFs) to master limited partnerships (MLPs), have been introduced to satisfy investor demand.

As commodities have been generating more interest, theres a large demand for a product to help average investors get a grip on the market fundamentals. Commodities as an asset class have been plagued by a lot of misinformation, and its sometimes difficult to separate fact from fiction or outright fantasy. The aim of Investing in Commodities For Dummies is to help you figure out what commodities are all about and, more important, develop an intelligent investment strategy to profit in this market. Of course, as with every other asset class, commodities are subject to market swings and disruptions, which can be a source of risk but also an opportunity. As the 2008 Global Financial Crisis demonstrated, even the savviest investors with the latest up-to-date market information can struggle with unique investment events.

These disruptions are part of the market process. Investors who protect themselves through a margin of safety philosophy will be able to protect their downside during periods of extreme volatility. Using this book, youll better equip yourself to avoid the pitfalls inherent in any investment activity.

My aim in writing Investing in Commodities For Dummies is to offer you a comprehensive guide to the commodities markets and show you a number of investment strategies to help you profit in this market. You dont have to invest in just crude oil or gold futures contracts to benefit. You can trade ETFs, invest in companies that process commodities such as uranium, buy precious metals ownership certificates, or invest in master limited partnerships. The commodities markets are global in nature, and so are the investment opportunities. My goal is to help you uncover these global opportunities and offer you investment ideas and tools to unlock and unleash the power of the commodities markets. Best of all, I do all of this in plain English!

Anyone whos been around commodities, even for a short period of time, realizes that folks in the business are prone to engage in linguistic acrobatics. Words like molybdenum, backwardation, and contango are thrown around like hello and thank you. Sometimes these words seem intimidating and confusing. Dont be intimidated. Language is powerful, after all, and getting a grip on the concepts behind the words is critical, especially if you want to come out ahead in the markets. Thats why I use everyday language to explain even the most abstract and arcane concepts.

One of the pleasures of writing a For Dummies book is that you get to use all sorts of fun, interactive tools to highlight or illustrate a point. Here are some icons that I use throughout the book:

I use this icon to highlight information that you want to keep in mind or thats referenced in other parts of the book.

When you see this icon, make sure that you read the accompanying text carefully: It includes information, analysis, or insight that will help you successfully implement an investment strategy.

I explain more technical information with this icon. The commodities markets are complex, and the vocabulary and concepts are quite tricky. You can skip these paragraphs if you just want a quick overview of the commodities world, but be sure to read them before seriously investing. They give you a better grasp of the concepts discussed.

Investing can be an extremely rewarding enterprise, but it can also be a hazardous endeavor if youre not careful. I use this icon to warn you of potential pitfalls. Stay alert for these icons because they contain information that may help you avoid losing money.