Adding color to your portfolio
Commodities are the oldest asset class and at the same time one of the most varied. Commodities are agricultural produce, mining products (industrial and precious metals) and sources of energy such as oil and gas. They are all derived from nature and then processed further. Commodities that are traded in standardized qualities and volumes on commodity exchanges can be used as financial investments.
Depending on the market environment and economy, commodities offer attractive return potential. Growing industrialization and urbanization in many countries, primarily China and India, are fueling demand for commodities, and this can push up prices.
Returns on commodities can be very volatile, and can be subject to sudden collapse. Overall, commodities carry a similar risks as equities.
The main advantage of commodities is that they enhance diversification. This in turn can lead to better overall risk/return characteristics in a portfolio. On a long-term view, commodities can offer some protection from inflation.
How do you go about investing in commodities?
UBS offers a very broad range of commodities investments. Commodities funds and certificates are particularly interesting for private investors, as they allow such investors to diversify in the commodity markets. Actively managed commodities funds, in particular, can produce an added value.
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