Your Questions About How To Invest In Commodities

Steven asks…

How can I start an investment fund like Berkshire Hathaway, and how much money do I need?

I invest in many different things: stocks, commodities, real estate, small businesses….
and I want to start a fund so that I can get equity from other investors.
How do I do that and how much money do I need?

John answers:

You have to be very intelligent, know how to pick stocks wisely, be affiliated with numerous banks, and be worth millions of dollars. Basically all you would need do is create a fund name and pool your own money into the fund and then diversify it. Once you are making money, you have your fund’s name registered with the securities and exchange commission. After completion of tons of paperwork and show proof to the exchange commission you know what you are doing, then you can sell stock in your fund. Read the story of Michael Price. He created the the Beacon funds with not much money at all and sold them 10 years later to Franklin Funds. I bought stock in his company 15 years ago and have never lost money.

Richard asks…

Oil a good investment now?

Would investing in a commodity-tied fund for oil (such as USO) be a good idea right now? Oil prices tend to go up during the summer as more people hit the road, but I’m wondering how the overall economic downturn will affect that. I know not to expect $100 a barrel anytime soon, but if I invested in USO — would it be realistic to expect even a 5% rate of return before Labor Day?

John answers:

Don’t limit yourself to Oil. Invest in industry groups and sectors currently in favor, e.g., Retail, Biotechnology, Business Services, Gold, Semiconductors, and a few other groups are looking good right now.

Put your money to work where the action is.

Good luck!

Maria asks…

Where would you start if you wanted to trade securities or commodities from home?

Just looking for some advice maybe a website or a book on how to start out trading from home. I am in college I can spend 40 to 60 hours a week learning or trading and I can afford to invest a little more than 100 dollars a week to start. Is it possible to make decent money doing this? By decent I mean maybe 1000-1500 a month eventually. I have had an investopedia account before but something more in depth that teaches you strategy

John answers:

Before putting any money at risk, I’d suggest paper trading using a simulator from either Interactive Brokers or TD Ameritrade. Both have pretty decent platforms and TDA’s even lets you reply parts of the day (but not tick by tick).

Deposit just enough real money to open the account and then paper trade until you’re profitable (which could take quite a few months or even years, depending on how dedicated you are). Then scale in your equity over time, rather than going “all-in” at once; Live executions are always different than simulated ones and you’ll need time to get the feel for it.

In terms of where to gain knowledge, try visiting the Elite Trader, Trading Blox, Traders Laboratory, Forex Factory and BabyPips forums.

If your interested in Algorithmic Trading, take a peek at my journal/blog below. I was a videogame programmer for about 20 years, then retired to become a full time algo trader. I discuss my systems and techniques there.

Good Luck!

Helen asks…

Does anyone know where Jim Rogers is recommending investing for the rest of the year?

Jim Rogers has suggested investing in commodities. He looks to have been right at this time. What I want to know is what is he recommending people invest for the rest of the year?

We all know the dollar is dropping fast so what should we do to protect ourselves, ivest overseas (Asia)?

John answers:

He’s a relatively long-term investor. I think his attitude is buy and hold soft commodities for the duration of the bull market. If your time frame is only 1 year, you could be out of pocket. I read an interview where he said commodities could easily go down in the credit crunch.

Last month I heard him say he was buying wheat (probably through an ETF), and that’s dropped more than 30%, but you can be sure when he goes to sell it, years from now, he’ll have made a handsome profit.

In recent interviews he’s mentioned Taiwan, because of the new government there, and China, since the big correction.

David asks…

Should one be investing in commodities nowadays?

I’m wondering if it would be a good idea to invest in certain commodities, like wheat, sugar and things like that. But I’m uncertain. Could you guys present to me some arguments for or against it?

I mean wheat is up because of that global warming scare and the ethanol enthusiasm, but that won’t last surely? What would be set to go up?

John answers:

1) It’s best to be able to operate on the “long” and “short” side of the market.
2) When you find yourself being too bullish on anything, BE CAREFUL.
3) It’s always a good idea to know when you’re “wrong” with a position so you don’t have big losses.

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