We all consume goods, services, and commodities daily. However, many of us don’t know where to begin when it comes to trading or investing in them. For starters, people tend to confuse these three terms and think they mean the same thing when in reality, they don’t.
While goods and commodities are tangible items that can be stored, services are intangible goods that can’t. Nevertheless, commodities and goods also have their differences. The former are raw materials like gold, silver, oil, gas, cocoa, and cotton, while the latter are the finished products of commodities. That said, if you plan on investing in quality goods, services, and commodities, continue reading these four vital tips.
1. Acquire physical goods or commodities.
As anyone would expect, the easiest way to invest in goods and commodities is to purchase these physical items like jewelry or precious stones. Then, when the prices of the commodities rise, you can always sell them and make a profit. However, despite how simple this method of investment seems, it is not always straightforward.
For instance, suppose you are a watch enthusiast who wants to invest in a luxury timepiece or vintage watch like a Rolex Submariner. You will need to conduct extensive research to know which watchmakers are worth your investment. Good examples include luxury watch brands like Cartier, Patek Philippe, and Rolex.
Then, when the prices of these luxury watches go up, you will have to determine what selling process to adopt. You can choose to auction the watch and sell it to whoever comes up with the highest price—just as one would auction a house—but this can be time-consuming. Alternatively, you can take it to a collector or watch experts, which is a more convenient way of selling your luxury watch.
The luxury watch expert will examine your watch’s condition to know the actual value of the watch itself. If the watch is still in its original box, you are likely to get a better offer. You see, these watch buyers are resellers who make provisions for a warranty card. Therefore, they will need to ensure that your luxury watch is in good condition before buying it.
2. Enter into a contract with an existing business or startup.
Entering into a contract is a great way to invest in quality goods and services. This investment method especially appeals to services because, unlike goods and commodities you can buy and keep, you cannot separate services from the business, and neither can you store them. Therefore, your best bet would be to partner with the company in the form of a contract or good faith negotiations.
There are various routes to investing in a business. For example, through debt, you can get a fixed return or convertible note, where your debt converts into shares with the company. However, this type of investment comes with its set of risks and uncertainties, especially if the business is a startup.
To mitigate against these risks, ensure that you conduct extensive research to know everything about the business and confirm its authenticity. For instance, if you want to invest in men’s outdoor gear, you will need to find men’s outdoor clothing or footwear brands that produce wears that cater to the outdoors. Next, find out if the business owners are passionate about their idea. Do they have the required domain expertise? How big is their market? And lastly, what makes them uniquely capable of delivering to their stakeholders when all is said and done?
3. Buy valuable shares.
When we say ‘buy shares,’ we mean to invest in the shares of an NYSE-listed company that produces goods, services, or commodities. The logic is that the companies’ revenue directly links with the price of its commodities, goods, or service, whatever the case may be. Therefore, if the company’s revenue increases, so will its share price, and if its revenue tanks, the share price will also decrease.
A good example is investing in a company like Alamos Gold Inc., an intermediate gold producer in North America and beyond, that mines precious metals. Alamos Gold has three operating mines; the Island Gold mine in Northern Ontario, the Mulatos gold mine in Sonora state, Mexico, and the Young-Davidson Mine.
Alamos Gold CEO John A. Mccluskey recently valued the company’s asset of Alamos Gold in Turkey alone to be about $1 billion U.S. dollars worth of project value. This is based on its Kirazli project in western Turkey. In addition, Alamos Gold has a track record of delivering long-term value, and they have strong financial statements and sustainable values that focus on returning capital to shareholders.
4. Invest in commodity ETFs.
ETF stands for exchange-traded fund, and it is a type of fund that invests in bundles of financial assets. You can invest in these funds through a carefully selected stockbroker or on a stock exchange. ETFs typically come in two flavors—physical and synthetic.
The physical includes investments in commodities like gold bullion, while synthetic ETFs are investments in commodity futures or options.
With this in mind, physical ETF investments share similar risk factors as buying goods or commodities directly. However, the advantage here is that you do not have to worry about storage or finding a buyer. Also, you can diversify your assets.