The festive season has just begun! We all undoubtedly purchase and use many commodities during the festive season. But let’s discuss some commodities to invest in during the festive season.

Stocks of Commodity-Producing Companies

This is the most feasible and cost-effective way to purchase commodities. Investors can purchase stocks of commodity-producing companies. Also, these companies may announce special dividends once in a while when they earn bumper profits. However, one disadvantage is that these stocks will correlate with the overall stock market compared to investing directly in commodities such as gold.

Metals-Focused Stock Portfolio/Mutual Fund

Another way to create a commodity-focused stock portfolio is by investing in passive index funds that track the Nifty Metal Index or active sectoral funds that invest in metal stocks and commodities. You can consider this investment option if you do not have the time and resources to analyse commodities and are confused about which commodities to invest in.

Gold

It has historically been observed that gold has negatively correlated with stocks, meaning that gold prices rise during a stock market crisis as people move their investments to safe-haven assets such as gold. So, to diversify your risks from investing in equity markets, gold can be a good option.

You can purchase gold in physical form or in the form of Gold ETFs. Compared to physical gold, investing through Gold ETFs is cost-effective and enables investors to sell them throughout the trading day. Also, the Indian government issues sovereign gold bonds (SGBs) in several tranches at regular intervals.

Silver

Alongside gold, silver is another commodity investors can consider this festive season. According to a research report by ICICI Direct, industrial segments with rapidly-rising economic conditions will keep global demand for silver afloat. You can also purchase silver either in physical form or in the form of silver ETFs.

Aluminium

Aluminium is used in every other commodity produced. It has vital applications in a crucial industrial segment such as automobiles. Hence the demand for aluminium is not going to weather away. Also, in 2021, aluminium prices were at an all-time high, experiencing a fall again. Considering the importance of this metal and its wide uses, aluminium can be regarded as a commodity to invest in by investors.

These are some commodities investors can consider investing in. A benefit of investing in them is that they act as an inflation hedge, whereas a drawback is that the prices of these commodities are volatile and are affected by many factors. Thus, investors should consider their personal circumstances before investing in commodities.

(By Vaibhav Agarwal, Founder, Teji Mandi)