Study: My Understanding of Investments

Why You Should Invest in Natural Resources

You may want to consider investing in natural resources for various reasons. For instance, there has been a decrease in the world’s natural resources. Thus, prices of various resources have been on the rise over the last decade. Investing in a natural resource such as a forest can be profitable for the savvy investor.

There are various type of natural resources that make good investments. Lumber, gold and coal are among the most profitable natural resources you can invest in. You should research the pros and cons of the investment option you are interested in prior to buying it.

Four Benefits of Investing in Natural Resources
Below are some reasons why it makes sense to invest in natural resources:
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i) Increase in income of developing countries
The last decade has seen many developing countries experience an increased in disposable income. The result has been an increase in demand for precious metals, building materials and other natural resources. Natural resources are also prone to supply shock, like is the case with any investment. However, in the long run, the prices of these investments continue to rise.
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ii) More infrastructure demand
Investing in natural resources is also made profitable due to an increase in infrastructure development around the world. In the developing economies, there is a huge demand for steel, lumber, gravel and other materials required for construction of roads and other public works. These countries are undergoing a construction boom mainly due to urbanization and an increase in population.

Apart from this, the majority of infrastructure constructed will have to be updated regularly. As more decades pass before these infrastructure are updated, the economies are likely to end up spending more on them.

iii) Political purchases
Various countries usually purchase natural resources to ensure there is no shortage of raw materials for their industries. Sometimes, the buying can be done through political agreements or foreign acquisitions. The demand created by governments is partly responsible for the profits investors of natural resources are getting.

iv) Store of wealth
You can use various natural resources to store your wealth. The natural resources are excellent stores of wealth since they are usually not subjected to fluctuations in the market. Precious metals are good examples of these natural resources. The prices of precious metals remain fairly stable, unlike is the case with stocks that are usually erratic depending on market forces. When it comes to storing wealth, precious metals are better investment options than stocks.

If you wish to invest in natural resources, it is important to educate yourself on the options available. Alternatively, hire an investment manager that has experience with the type of resources you would like to invest in. An experienced manger can help you find out which investment options would be best for you based on your expectations.