Alternative Investments: Commodity

Good question. Exactly there are 3 kinds of commodities ETFs. First hold physical commodities, second uses only derivatives thus is synthetically exposed, third has stocks of companies which exploit commodities. I would say all but third are directly exposed to commodities.
 
The fact this is fund does not mean indirect exposure. And you may trade ETFs as ordinary stock on market.
 
companies that exploit commodiest is INDIRECT.
investments in actual commodities or futures on commodities or ETFs that invest in futures of commodities are DIRECT
 
rollerbladerlevel3 wrote:
companies that exploit commodiest is INDIRECT.
investments in actual commodities or futures on commodities or ETFs that invest in futures of commodities are DIRECT
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Did I say something else? BTW, I was investing in commodities ETFs. There are commodity ETFs which invest solely to mining companies thus those ETFs are indirectly exposed to commodities and are listed under commodity ETFs.
See:
http://etf.stock-encyclopedia.com/category/commodity-etfs.html
 
I think mutual funds vs ETFs may come up somewhere on the exam…pretty nuanced differences (5 of them)
 
I could only think of (ETF):
- No record keeping of shareholding
- Fees paid to S&P etc
- Possibility to trade during the day
What else would you say?
 
My understanding of Direct Investing in Commodities is having the bushel of corn dropped off in your driveway… Go long a futures contract, and dont take an offsetting position before maturity, you better start looking for a silo to store it…
 
Direct investment in commodity :
  • Buy physical commodity
Indirect investment in commodity :
  • Commodity stocks
  • Commodity mutual funds
  • Commodity futures index (commodity etf and commodity certificate)
  • Commodity futures contract
This is my understanding, someone please correct me if I am wrong ….
 
Commodity futures are a direct investment. Not entirely sure about the certificate but I would venture they are also a direct investment.
 
Futures return = excess return = spsot return + roll return
2 return components in case of investment in futures contract
3 components in total return commodity index, 4 components in fully collaterized portfolio of futures positions
However, if we directly invest in physical commodity there is only 1 return component i.e. spot return
Above were the basis of my understanding …
 
Voyager3 wrote:
Commodity futures are a direct investment. Not entirely sure about the certificate but I would venture they are also a direct investment.
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Thanks
 
Direct: Actual commodity and derivatives
Indirect: Everything else.
Not much to it.
 
It means :
Direct investment ( commodity ) 1) buying physical commodity 2) publicly traded derivatives such as commodity futures …
Indirect investment ( commodity ) all other forms of investment
Direct investment ( real estate ) buying physical property … Sole as well as in partnership
Indirect investment ( real estate ) publicly traded REATS …
 
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