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The Curious Bag
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There are a number of different choices that investors have available to them as far as the different markets are concerned. With a commodity index fund, investors have the chance of being able to invest in a markets that were reserved for professionals.
Features
A commodities index fund is baskets of commodities that will track a particular commodity index. The idea is that by purchasing a fund that tracks the different moves of commodity indexes it will provide better performance and diversification for investors.
Weightings
The weightings for each commodity index fund should mirror the performance of the actual index. The two ways that this is accomplished is through having an equal weighting based on the overall commodity contracts for the average or through having a weighting determined by the most liquid commodities futures contract.
Rebalancing
Rebalancing is when the commodity index fund will repurchase different futures contracts to maintain the same balance as the index.
Benefits
The benefits of investing in commodity index funds include: they protect against inflation, are very liquid and have been shown to equal the same performance as stocks.
Famous Ties
In 2003, financial guru Jim Rogers argued that commodities are in a long term bull market and that investing in commodities through an index fund offers less risk than investing in stocks.
Source:
Commodities for Dummies: Commodity Index
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