Commodities are just like stocks and other securities. Their values could go up and down over the longer term. Some experts have been proposing that the future hold a specifically good time to be invested in commodities. They believe that there are several demographic factors that props up commodities better when compared to other assets.
Population Growth
The world is on the brink of population explosion. Almost all countries across the world are experiencing simultaneous record increases in the population. Commodities are essential for the whole world.
Therefore, if the number of people present in the world spikes up, so does the demand for essential commodities. As a matter of fact, there are multiple studies that predict shortages of essential commodities and a resulting famine.
From the point of view of an investor, the demand is pretty high. There is also no chance of it dropping down in the future. Thus, investment in commodities is a good investment bet given that the current valuation is appropriate. The fundamentals are strong, and just the valuation needs to be appropriate.
Urbanization
Developing countries such as China and India are urbanizing at a speed that has not been heard of before. Newer smart cities are being built to accommodate the burgeoning population of these countries. And the real estate sector is in a boom.
This is a very bullish scenario for commodities. This is just because many metals like iron and steel are extensively used in the construction of houses and buildings. Also, commodities play a very vital role in construction projects.
Therefore, more houses and buildings are being built. The demand for the commodities needed in these soar up in the sky. This scenario can be expected to go on for several years. If you’re considering to invest in real estate, join RealVantage and start investing in properties.
Industrialization
The world has seen a vast wave of industrialization in the 19th century. This is what created the western world or the developed world as we know today. A second such wave is already coming. And this wave is transforming almost every country in the world.
Inelasticity
The economic concept of elasticity refers to the degree at which the demand for a product fluctuates with its price. Therefore, if a small change in prices causes a big change in demand, the product can be considered inelastic.
On the other hand, commodities typically have an inelastic demand. This is because they are usually needed to maintain good living conditions. For example, the demand for heating and electricity is not optional in the modern world: it is necessary. That’s also true for the demand for homes and food.
People will continue to buy such products and goods unless they are incredibly overpriced. From an investor’s perspective, having control over such commodities appears like good value proposition which is likely to pay out rich dividends in the future.