There are plenty of people who will manage a commodity investment for you, but you need to choose carefully as most lose!

This article is all about picking a manager or doing it yourself via a software program and targeting the big gains that make commodity investing so lucrative.

Risk & Reward

Commodity investing by its very nature is risky, however with risk goes reward. The real key is management of risk and this is what separates out the great performers from the losers.

Reducing risk and increasing returns

Commodity investing is popular as you are investing in a non correlated investment to stocks.

Within the commodity or futures markets you have great diversification and fantastic profit potential.

There are managers who target and make 30 50% gains per annum in commodity investing, so lets find out how we target them.

Lets look first at managers to avoid:

1. A broker

On the desk of commodity firm who will help you trade to make money. Keep in mind, he is a broker not a money manager and chances are he wont make you money.

If brokers could make money they wouldnt be brokers

2. Managers with hypothetical track records

These managers simply launch a performance graph that looks great in hindsight (lets face it we can all make money in hindsight) and then very often collapses in real time trading.

Forget this group.

3. Managers claiming real time track record but no audit

Not only do you want the track record verified, you want a statement that the account you are investing in is representative of all funds under management.

4. Drawdown

Watch out for highly volatile performance the bigger the drawdown the bigger the risk of ruin.

Generally, look for manager who has smooth equity curve.

Many managers have drawdowns of 50% or more avoid them. Look for drawdowns of around 30% max.

5. Conflict of interest

Check your manager does not earn a proportion of the dealing fees, as this sets up a conflict of interest. They may deal for commission, rather than profits.

Try and get managers who have confidence to be paid on performance only.

Keeping the above in mind you need to look for managers that are professional, or buy a software program follow the signals and do it yourself

This latter option is a great way, you are your own manager and of course dont pay fees!

Discretionary managers

Real time performance, audited figures and responsible money management, as mentioned above. You may also like to check the following:

Find out about how much money they have under management, their methodology and how long their track record is 3 5 years is enough. Beware of short track records as they could have been lucky!

Make sure your comfortable with them, their investment approach and money management.

Like all managers they will have losses, you should stick with them through these periods and confidence in them to get it right will help.

Software be your own manager

Most commodities trend and there are a lot of good software programs you can buy that, can target 30 50% in annual gains.

This means you dont have to pay a manager and have control over your investment.

With the internet and the power of computers and the recent developments in software, more and more investors are taking this route.

You need a simple system; you can understand, can apply with confidence, with real time track record and your all set.

Note: You may want to read our other article futures trading software for in depth way to pick a system to invest in commodities for big gains.

Commodity investing Which way is best?

Commodity investing in this way if you have the right trading system, can be very lucrative. You have the potential to out perform the bulk of managers and keep all the profits yourself.

You can give it to a broker to execute it for you, or place the signals yourself.

Read our other article on Futures trading software for more information.