Economic instability, political unrest, devaluation of currencies, and the on-going US-China trade war signals that we aren’t very far from a global economic crisis. Organizations seek to explore alternative investment options to keep the business functions going and to integrate some level of sustainability.
But if we’re heading to an economic downfall, is it sane to risk your investments in commodities? The answer is, YES!
Let’s understand how:
Their value rises when stocks and bonds fall
Commodities like precious metals, crops, and oil are negatively correlated with bonds and stocks, which means during a period of inflation when interest rates rise and the value of stocks and bonds fall; the value of commodities increase.
So if you’re worried about inflation affecting your investments, commodities are an ideal way to hedge against it and balance the overall value of your organizational portfolio. According to an article published in Forbes, the value of commodities will see an impressive increase by the end of this year.
They provide a store of value
A store of value means that the asset can be sold at a later time with its original value intact, which means if you invest in commodities, there’s a high probability that you’ll get an equal or higher return when you sell them.
Let’s imagine a scenario where the global economy stabilizes and there’s no inflation; the value of stocks and bonds increases. What will happen to the value of commodities? Will you lose your investments?
In such a situation, your investments might not yield high levels of profitability but they’ll retain their original value and if you choose not to sell them immediately, their value will increase over time because they survive all sorts of economic shocks. Precious metals, especially gold, is said to be an excellent store of value.
They’re liquid assets
Liquid assets can be converted into cash easily and quickly with no or low loss of value. Commodities are liquid assets and you can be sure that there will always be buyers for it. So if you need extra cash for addressing a financial emergency in your organization, you can always sell the commodities.
If you want to learn more about investing in commodities, visit our website. We have a number of informative resources that can help you to balance your organizational portfolio and increase its overall value.