Hot Commodities by Jim Rogers is a Good Read

Jim Rogers's new book Hot Commodities - How Anyone Can Invest Profitably in the World's Best Market is an interesting read. Rogers, a well-healed and well-traveled investor, knows a thing or two about commodities and the book is full of useful facts and insights about commodities. His discussion of oil, gold, lead, sugar and coffee are well written and very informative. He is a bull on China and says that they will consume huge amounts of commodities.

Rogers argues that commodities are no more risky than stocks if you take the time to learn about their fundamentals and price patterns. Commodity prices run in cycles so if you buy on the upside and take your profits before the downside starts, you can make a lot of money.

He tells investors to invest in commodities with individual stocks of companies that produce commodities or companies that service commodity producers and countries or real estate in areas that are rich in commodities. See Is It Too Late to Buy Commodities? for a list of commodity-oriented exchange-traded funds.

But his favorite way to invest is to directly buy commodities. He describes several ways to do so one of which is buying commodity futures. Personally I have never bought a futures contract and never will. In my opinion retail investors have no business trading commodity futures. One misplayed trade and you can lose piles of money. Even in a bull market timing is everything when you trade futures. You can make lots of money very quickly or you can have your head handed to you if you guess incorrectly about short-term price moves. Even if you work with a broker, you can lose lots of money. For most people, trading futures is like playing Russian roulette; eventually your luck runs out and you lose big.

Posted May 12, 2006.