What You Should Know About Investing in Natural Resources There are various reasons why you may want to invest in natural resources. For example, the world natural resources have been depleting. This has led to an increase in prices of various resources over the years. 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. Among the most common are gold, coal and lumber. Before investing in any natural resource, it is important to find out its benefits and downsides. Four Benefits of Investing in Natural Resources Here are some reasons why you should consider investing in some natural resources:
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i) Increased income in developing countries The last few years have seen an increase in the incomes of developing countries. As a result, the demand for building materials, precious metals and other natural resources has also been increasing. Like is the case with any investment, supply shock is a potential risk with natural investments, especially oil. However, in the long run, the prices of these investments continue to rise.
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ii) More infrastructure demand As more infrastructure projects continue to be launched globally, the demand for natural resources continues to surge upwards. 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. The increased construction in these economies is brought about by a booming population and increasing urbanization. Moreover, majority of these public infrastructure have to be updated on a regular basis. When countries go decades without upgrading their infrastructure, they are likely to spend more on the natural resources needed for construction. iii) Demand by countries Various countries usually purchase natural resources to ensure there is no shortage of raw materials for their industries. The buying may be done through foreign acquisitions or political agreements. Investing in natural resources is profitable partly due to the demand created by governments. 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. While company stocks are erratic depending on market forces, the prices of precious metals remain fairly stable. In the long run, the metals are better store of wealth than stocks. Before getting into investing in natural resources, it is advisable to know how they work. Alternatively, hire an investment manager that has experience with the type of resources you would like to invest in. The manager can point you in the right direction with regards on how to get started and set up your investment portfolio for the best benefit.