Trading Commodity Indexes - By: Ahmad Hassam

Indexes exist for all sorts of assets and play a useful rule in the world of investing. If investing is like flying an airplane, the index can be likened to the altimeter or the instrument that measure the height. Commodity market is going to experience many yearlong boom. One of the ways to profit from this boom is to invest in a commodity index.

Just like other indexes, commodity indexes track the performance of a basket of commodities. This basket usually includes wheat, corn, soybeans, coffee, sugar, cocoa, cotton, lean hog, live cattle, feeder cattle, heating oil, gas oil, unleaded gas, crude oil, natural gas, aluminum, copper, lead, nickel. Zinc, gold, silver etc So you can see, these indexes track a variety of commodities.

The most popular commodity index is the Goldman Sachs Commodity Index (GSCI). GSCI tracks the performance of 24 commodity futures contracts. Another popular commodity index is the Reuters/Jefferies Commodity Research Bureau Index (CRB).

CRB is widely followed by institutional investors and economists as a benchmark. CRB tracks the performance of a basket of 19 commodities that are selected on the basis of their liquidity and performance. Another is the Dow Jones- AIG Commodity Index (DG-AIGCI). DG-AIGCI is also widely followed by the commodity investors and places a premium on the liquidity and production value of the commodities so that all commodities are well represented while at the same time no commodity dominates the index.

Rogers Commodities Index (RCI) has a grand list of 35 commodities and tracks the most commodities amongst the different commodity indexes. Deutsche Bank Liquidity Commodity Index (DBLCI) is the newest kid. There are many ways to invest in these commodity indexes.

The best and the most direct method is to trade futures contracts on one of the commodity index. A few of these indexes have futures contracts that track their performance. You can also trade futures contracts on individual commodities included in the index.

Another method is to invest in commodity mutual funds that track these indexes. One way is to invest with a third party manager that uses commodity indexes as the basis of their investment strategies. Some of these vehicles include mutual funds, commodity pools or Commodity Trading Advisors (CTAs).

Commodity Exchange Traded Funds (ETFs) can also be one of the alternatives. Commodity ETFs is a popular alternative to those who do not want to trade futures. So you can not only use these indexes to track the performance of a basket of commodities in the market but also profit from them.

About the Author

Mr. Ahmad Hassam has done Masters from Harvard. Get FREE COPIES of the HVMM Ultimate Day Trading System and Universal Risk and Money Management Tool! Read the story of RIchard Samuels, a post office mailman and how he made a fortune with these Neutrino Forex Signals!

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