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A basic guide to commodity ETFs

The first thing that you as an investor must know about commodity ETFs is how the supply and demand of raw materials will work in the years to come.

The middle class is growing at a huge rate. Although there are times where countries fall into economic recession when things start to pick up again the demand for goods will start to grow. Countries that are experiencing an economic slowdown at any time should think of it as a delay. This delay will extend the commodity bull market as opposed to destroying it.

Keeping this in mind as an investor you should be thinking about where future resources will be coming from. At the moment China, India, Russia and Eastern Europe are areas that investors should keep an eye on.

Commodity EFTs can be used in two ways. Firstly many people choose to invest directly into futures. These highly leveraged investments have money left over. Investors then take this money and place it into interest-bearing bank accounts. The proceeds of this are then used to pay dividends and expenses.

Many people use this as a way to track one single commodity. Examples of commodities that are used in this way is gold and silver. Some people use this method to track a basket of commodities.

Anyone that is currently investing or thinking about investing in commodities should think about the tax implications of their investments. One way to do this is to hire an accountant and a tax lawyer to get the paperwork sorted out.

If you are an investor you should prepare for an increase in the demand of commodities in the future. These can be traded as if they are stock. Economists are predicting that commodity ETFs will be popular with investors for a good amount of years to come.