Why You Should Invest in Commodities

These portfolio diversifiers are in a long-term uptrend.

Gold and silver bars, as well as canisters of oil, rest on spreadsheets indicating commodity performance.
(Image credit: Getty Images)

Most investors have probably never fretted about how to add a nice stake in pork bellies or winter wheat to their portfolio. But many have lined up in Costco to buy a gold bar. All such investments are part of the broad asset class of commodities, along with crude oil, coffee, copper and more. Despite impressive run-ups in many commodities this year, some strategists say they’ve still got a long, upward run ahead of them and deserve a spot in your portfolio.

That’s because commodity prices tend to ebb and flow in long cycles, largely governed by human nature, says John LaForge, head of real asset strategy at Wells Fargo Investment Institute. Commodity producers ramp up production when prices are rising, until eventually markets are saturated, or at least so well stocked that profits start to suffer. “It gets to a point where producers aren’t interested in planting an extra acre of corn or producing an extra barrel of oil,” says LaForge. 

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Anne Kates Smith
Executive Editor, Kiplinger's Personal Finance

Anne Kates Smith brings Wall Street to Main Street, with decades of experience covering investments and personal finance for real people trying to navigate fast-changing markets, preserve financial security or plan for the future. She oversees the magazine's investing coverage,  authors Kiplinger’s biannual stock-market outlooks and writes the "Your Mind and Your Money" column, a take on behavioral finance and how investors can get out of their own way. Smith began her journalism career as a writer and columnist for USA Today. Prior to joining Kiplinger, she was a senior editor at U.S. News & World Report and a contributing columnist for TheStreet. Smith is a graduate of St. John's College in Annapolis, Md., the third-oldest college in America.