A commodities benchmark is some type of standard which you can compare an investment by. A standard is very helpful for people trying to figure out how much profit they are making compared to other investments. People looking for high rates of returns may want to use other standards than those looking for long-term and safer purchases.
Ebele Kemery says that the type of commodity you choose is also important. For example, if you choose to trade crude oil, then you will want to compare your trades or investment to indexes that are made of energy commodities. This will give you a more accurate picture of the value your investment holds compared to the rest of the market.
When you are trading crude oil, you will want to compare your investments to an energy index. If you are trading in a soft commodity, then you will want to compare your trades with an index weighted to soft commodities. You will also want to compare your investments to investments that are similar in size to your investment. So an ETF in gold should be compared with a precious metals commodity index while an ETF which follows agriculturals like wheat should shadow an index weighted to agriculture.
A very common index used to compare various commodities is the Rogers International or RICI, while others include the CRB, the Goldman Sachs and DJ AIG commodity index. Using these indexes allows you to measure how your investments are doing compared to the whole market. By knowing how your investments are doing compared to the whole market, you will know if you are in the right area of the commodity market. This will be able to help guide you to the right place for your money. By using this strategy, you will be able to put your money in the most profitable parts of the marketplace.
When using a commodity benchmark, you should always keep in mind that you want a relevant investment index for comparison. This is important, because the risk and growth factors are very different in various investments. If you are placing your capital in sugar, then you would not want to compare your investment to LME aluminium prices. If you did this, your sugar trade would appear to have a low return, even if it performed better than the industrial metals.
When you use a benchmark made of similar commodities, you will be comparing investments that are of the same caliber. This better helps investors understand how the average market is performing and how their own portfolio is performing.
For commodities investments, you will want to compare your investment to commodity indexes. This will show you if your investment is as profitable as other investments that are of the same risk level.
The best option for a commodities benchmark is a commodities index. By finding an index that tracks commodity values, you will be seeing how the market of commodities is moving relative to your own investments. This is a great way to measure how successful your commodities investments are overall. When using these benchmarks, your goal is aimed at beating the market. You always want your investments exceed the profits of the other options available to you in the open market.
Ms. Ebele Kemery is a Commodities Leader with a track record of consistently profitable trading efforts and has expanded business through understanding of client needs and developing customized solutions that leverage a wide variety of techniques and market intricacies.
For more details please visit: http://ebelekemeryny.blogspot.com/