Saturday, September 19, 2009

Commodity Trading

I've been seeing a few commercials that really make me wonder about public perception of investment markets. The ad I keep seeing portrays one person who is down and concerned about his investments talking to another who exudes confidence because she's in commodities instead of stocks or real-estate. The commodity market has been advertised as being an easier place to invest because apparently p/e ratios are confusing and price speculation is an easy road to profits. Maybe I'm ignorant on the subject but you're either dealing with contracts for delivery at a later date, or the cost of storage. The possibility of losing money is there and I'd be surprised if it's any simpler.
I wonder why I never see bonds pushed as a less confusing and less risky alternative to stocks or real-estate. While there are some questionable bonds out there, there are also plenty of bonds out there that offer a reasonable measure of security. You can also predict your return easier since they have a stated interest rate and maturity. It's also much easier to make guesses as to whether or not a company will still be in business in two years. It doesn't need to grow for you to make money, it just needs to not be distressed between the purchase date and the bond maturity date.

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