How to invest in commodities in Australia | Finder

How to invest in commodities in Australia

Coffee, cotton and even cattle. Find out how you can invest in commodities.

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Commodities are items that can be interchanged, such as corn or precious metals. Find out why they might have quite volatile prices, whether they're a good investment and how you can invest in them from Australia.

How can I invest in commodities?

There are four different ways that you can invest in commodities:

What are commodities?

Commodities are basic natural resources such as oil, food and metals. They can be thought of in some ways as the basic building blocks of our economy.

There are two categories of commodities:

  • Hard commodities are those that need to be mined or drilled to be found, such as metals and energy products.
  • Soft commodities are those which are grown, like corn and wheat.

Are commodities volatile?

Commodity volatility (how much the price moves up and down) is generally reflective of supply and demand. If there were loads of avocados grown just as everyone decided they didn't like guacamole anymore, then the price of your average avocado is likely to go down. If a worldwide virus leads to everyone panic buying toilet roll, you're likely to see the price rise.

Due to supply and demand, the volatility of commodities tends to be higher than for other types of investment, but this depends entirely on the commodity.

List of commodities

This isn't an exhaustive list of commodities, but it gives you a good idea of what can be considered to be a commodity.

  • Oils, such as soybean oil and crude oil
  • Corn
  • Cocoa
  • Cotton
  • Live cattle, such as cows and pigs
  • Metals, such as gold or silver
  • Oats
  • Orange juice
  • Sugar
  • Wheat

Purchasing the commodity

You can choose to invest in a commodity by purchasing the commodity. You can often do this by looking for a dealer that sells the commodity and purchasing it from them. You can choose whether you want to eventually sell it back to the original dealer or to sell to someone else.

This is often done with gold and silver, but you'll need to ensure that you have somewhere to store the commodity between buying and selling it.

Commodity futures contracts

With futures contracts, you are agreeing to purchase commodities at a specified point in the future. These were created for sellers like farmers, who would start growing a type of commodity, such as wheat, long before it could actually be sold, to help manage the financial risk.

Nowadays, futures contracts aren't solely for farming. You can purchase futures contracts in just about anything, and they don't always end with physical items.

Physical commodities trading is only available to advanced traders or corporations. In Australia, retail investors can trade commodities via contracts for difference (CFDs). These are derivatives contracts where you're not actually trading the underlying asset, instead you're betting on the price volatility of commodities. Traders typically use leverage, which can make CFDs a lot riskier than stock trading.

Data updated regularly
Name Product Minimum Opening Deposit Minimum Opening Deposit Commission - ASX 200 Shares Available markets Platforms
eToro CFD
US$200
US$200
No commission
Forex, Shares, Indices, Cryptocurrencies, Commodities, ETFs
eToro Trading Platform
Disclaimer: Trading CFDs and forex on leverage is high-risk and losses could exceed your deposits.
Join the largest social trading network in the world.
Plus500 CFD
$200
$200
No commission
CFD on Forex, Commodities, Cryptocurrency, Indices, Shares, Options and ETF's
Plus500 Trading Platform
Disclaimer: This is a CFD provider. Trading CFDs on leverage is high risk and losses could exceed your deposits.
Trade CFDs on Australian and International shares, indices, cryptocurrencies, commodities and more.
IG CFD broker
$0
$0
0.08% with $7 minimum
Indices, FX, Shares, Commodities, Cryptocurrency, ETPs, Options, Interest Rates, Bonds
MetaTrader 4
ProReal Time
IG Trading Platform and Apps
L2
Disclaimer: Trading CFDs and forex on leverage is high-risk and losses could exceed your deposits.
Trade from over 15,000 markets with Australia's leading service for CFD trading and forex.
IC Markets CFD (True ECN Account)
US$200
US$200
0.1% per side
ASX shares, global shares, indices, commodities, forex, cryptocurrencies
MetaTrader 4
MetaTrader 5
cTrader
Disclaimer: Trading CFDs and forex on leverage is high-risk and losses could exceed your deposits.
Trade 230+ different products with fast execution under 40 milliseconds on average.
City Index CFD
$0
$0
0.08% with $5 minimum
ASX shares, 4,500 global shares, indices
MetaTrader 4
At Pro
Advantage Web
Disclaimer: Trading CFDs and forex on leverage is high-risk and losses could exceed your deposits.
Trade CFDs on indices, FX, global & Australian shares and commodities, plus access other markets such as metals, bonds and interest rates.
Blueberry Markets CFD Trading
US$100
US$100
$20 per month subscription plus 2% of trade size
Indices, ASX200 Shares, Commodities, Cryptocurrency
MetaTrader 5
Disclaimer: Trading CFDs and forex on leverage is high-risk and losses could exceed your deposits.
Bottom of the market fees on forex, CFDs and commodities with 24/7 quality customer service.
CMC Markets
$0
$0
0.09% with a $7 minimum
ASX shares, 25+ global exchanges, treasuries, indices
CMC Next Generation CFD, MetaTrader 4
Disclaimer: Trading CFDs and forex on leverage is high-risk and losses could exceed your deposits.
Share CFD and forex ideas with other traders and take your strategy to the next level with over 100 technical indicators and charts on CMC’s mobile-friendly Next Generation platform.
Pepperstone CFD
$200
$200
No commission
ASX shares, global shares, indices, cryptocurrencies, commodities
MetaTrader 4
MetaTrader 5
cTrader
Disclaimer: Trading CFDs and forex on leverage is high-risk and losses could exceed your deposits.
Trade stock indices on the global market, via Pepperstone's MetaTrader 4 and cTrader client terminals.
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Trading CFDs and forex on leverage is high-risk and you could lose more than your initial investment. It may not be suitable for every investor. Refer to the provider’s PDS and consider the risks before trading.

Buying commodity exchange traded funds (ETFs)

Commodity ETFs allow you to invest in a series of different firms or companies, allowing you to spread your investment out and reduce the risk. We explain ETFs in some detail in our handy guide if you're not completely sure on how they work.

ETFs are a much simpler way of accessing the stock market, so they're quite well suited to you if you're a newbie. There are loads of ETFs for a huge range of different commodities, so you have plenty of choice.

Data updated regularly
Name Product Brokerage on AU ETFs Inactivity fee Markets
Superhero share trading
AUD 0
No
ASX shares, ETFs
Pay zero brokerage on all Australian ETFs.
Trade ASX stocks with a flat $5 commission fee and a low minimum investment of just $100.
eToro Share Trading (US stocks)
N/A
US$10 per month if there’s been no login for 12 months
US shares
Zero brokerage share trading on US stocks with trades as low as $50.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
Bell Direct Share Trading
AUD $15
No
ASX shares, mFunds, ETFs
Exclusive: New customers who open an account with Bell Direct through Finder will pay no brokerage fees on the first five stock or ETF trades until April 30, 2021 (T&Cs apply).
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
IG Share Trading
Finder Award
IG Share Trading
AUD $8 or 0.1%
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
CMC Markets Stockbroking
AUD $11 or 0.1%
No
ASX shares, Global shares, mFunds, ETFs
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
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Important: Share trading can be financially risky and the value of your investment can go down as well as up. “Standard brokerage” fee is the cost to trade $1,000 or less of ASX-listed shares and ETFs without any qualifications or special eligibility. If ASX shares aren’t available, the fee shown is for US shares. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.

Buying stocks and shares in companies that produce commodities

Which stocks and shares you choose to purchase will depend on what specific commodity you fancy investing in. Do some research into the commodity you want to invest in to find out some companies that produce it and buy shares in those companies.

You might need to know your way around the stock market to buy shares. The share trading platform that you choose to use will have some guidance to help you along the way.

Are commodities a good investment?

All investing carries risk, but many commodities are items that consumers continue to buy even in a recession. Everyone will still need to eat, for example, so some people view commodities as less risky, but within that, there will be a huge range - oil is a commodity and can be highly volatile.

Compare share trading platforms

Data updated regularly
Name Product Standard brokerage fee Inactivity fee Markets International
eToro Share Trading (US stocks)
US$0
US$10 per month if there’s been no login for 12 months
US shares
Yes
Zero brokerage share trading on US stocks with trades as low as $50.
Join the world’s biggest social trading network when you trade stocks, commodities and currencies from the one account.
Superhero share trading
$5
No
ASX shares, ETFs
No
Pay zero brokerage on all Australian ETFs.
Trade ASX stocks with a flat $5 commission fee and a low minimum investment of just $100.
Bell Direct Share Trading
$15
No
ASX shares, mFunds, ETFs
No
Exclusive: New customers who open an account with Bell Direct through Finder will pay no brokerage fees on the first five stock or ETF trades until April 30, 2021 (T&Cs apply).
Bell Direct offers a one-second placement guarantee on market-to-limit ASX orders or your trade is free, plus enjoy extensive free research reports from top financial experts.
IG Share Trading
Finder Award
IG Share Trading
$8
$50 per quarter if you make fewer than three trades in that period
ASX shares, Global shares
Yes
$0 brokerage for US and global shares plus get an active trader discount of $5 commission on Australian shares.
Enjoy some of the lowest brokerage fees on the market when trading Australian shares, international shares, plus get access to 24-hour customer support.
CMC Markets Stockbroking
$11
No
ASX shares, Global shares, mFunds, ETFs
Yes
$0 brokerage on global shares including US, UK and Japan markets.
Trade up to 9,000 products, including shares, ETFs and managed funds, plus access up to 15 major global and Australian stock exchanges.
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Disclaimer: This information should not be interpreted as an endorsement of futures, stocks, ETFs, CFDs, options or any specific provider, service or offering. It should not be relied upon as investment advice or construed as providing recommendations of any kind. Futures, stocks, ETFs and options trading involves substantial risk of loss and therefore are not appropriate for all investors. Trading CFDs and forex on leverage comes with a higher risk of losing money rapidly. Past performance is not an indication of future results. Consider your own circumstances, and obtain your own advice, before making any trades.

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