The Relevance Of Commodities In The Investment Strategies Of A Portfolio
In recent years, investor interest in commodities has grown substantially. After the drop in price occurring
between late 2008 and early 2009, there has been upward pressure due to several factors including increased demand from
China, India and other emerging markets that require oil, steel and other commodities to support their manufacturing
industries and infrastructure development. The ability to obtain interesting performance is perhaps the most obvious reason
for the increased interest shown by investors, but it is not the only one. Commodities may also offer other significant
advantages, including improved portfolio diversification and a hedge against inflation. Diversification and protection from
inflationary phenomena are two fundamental objectives when creating a portfolio. In this respect, commodities have always
been appreciated for their low correlation with traditional asset classes (typically, stocks and bonds) and their structural
appreciation in periods of a generalised increase in prices. Thanks to these features, commodities continue to be an essential
component when creating the portfolios of both institutional and retail investors. The results of this study confirm the
importance of investing in commodities when choosing an investment portfolio. The investment in commodities is therefore
an excellent solution for the use of one’s capital and is thus increasingly popular among investors, especially in times of
crisis and instability. Indeed, commodities have the advantage of preserving value long-term and, given that they react
differently to changes in economic fundamentals, they are able to provide investors with significant earning potential and the
benefits of a diversified portfolio. Consequently, incorporating commodity indices into investment portfolios can effectively
reduce investment portfolio risk.
JEL classification: G11; G14; G15.
Keywords- Commodities; Gold Market; Portfolio Diversification; ETC; ETF; Derivatives.