Trading Commodities Like Soybeans, Gold And Pork Belly

WGN-TV Show Notes January 13, 2005

The stock market isn’t giving anyone a reason to cheer so far this year. So you may want to consider other opportunities for investing.

Chicago was once the pork-belly capital of America, and tens of millions of dollars worth of pork bellies, coffee, sugar and other commodities are traded here each day. But even if you’re not a commodities trader, you may be able to cash in and spice up your 2005 investment returns.

“If you put everything you owned in stocks in the S&P index in 1982, you would own Chicago by now because it went through the roof,” says Jim Rogers/ author of Hot Commodities.

Would-a, could-a, should-a. But legendary investor Jim Rogers, who started the quantum fund and retired rich at 37 says it’s not too late to take part in the latest bull market.

According to Rogers, countries like China are consuming these natural products faster than we can produce them. “Ten years ago, China was exporting cotton. Now, they’re importing cotton. Ten years ago China was exporting oil. Now, they’re importing oil,” Rogers says.

And when supply goes down, prices go up. In his new book, “Hot Commodities,” he predicts a 10-year bull run for commodity prices. But you have to pick your product carefully.

“Don’t get me wrong. I own some gold. But you’re going to make a lot more money in soybeans, cotton, orange juice or sugar or something else than you will in gold,” Rogers says.

But before you start buying barrels of oil to store in your garage, consider how commodities will fit into the rest of your portfolio.

“I happen to think commodities make sense as part of a broadly diversified portfolio, but I would limit them to a very small slice of that portfolio, say, less than 5 percent of assets,” says Christine Benz, Morningstar.

Commodity index funds and mutual funds can make the investment a lot less risky than buying commodity futures contracts.

“Investing directly in commodities is a very risky proposition. Even these commodities funds, I would limit them to a small stake of the portfolio and definitely rely on an active manager to do the selection of the individual securities,” Benz says.

It’s like any investment: do your homework first, then write the check.

“I’m telling you, stocks and bonds are not going to be a good place for the next 10 to 15 years. Commodities are, but you make up your own mind,” Rogers says.

Since he retired at 37, Jim Rogers has traveled the world looking for the next big thing in investments. He told me he has his 19-month daughter fully invested in commodities. She doesn’t own a single share of stocks or bonds. Then again, she’s got a few years to go until she retires.

RESOURCES

www.jimrogers.com

To check out various commodities funds, go to: www.morningstar.com