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. Now the most important commodity index is the Goldman Sachs Index (GSCI). GSCI is based on 24 commodity futures contracts. Now most of the commodities have pretty liquid futures market and these markets are very important in setting the prices in the whole sale as well as retail commodity markets. The second commodity index that you need to keep in mind is the important 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). Last but not the least, is the great investment opportunity that Commodity ETFs ( Exchange Traded Funds)provides. This is a highly popular alternative that a good investor should not miss. These Commodity ETFs track the performance of a commodity index and provide you with a great opportunity to profit from the boom in the commodity market!
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