National Bank Direct Brokerage
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National Bank Direct Brokerage
CIBC Investor's Edge
Here we discuss how you can invest in cocoa and the risks that come with it.
We run through the most common and accessible methods:
Exchange-traded funds (ETFs) allow you to invest your money in a variety of assets rather than focusing your investments in one or two firms.
ETFs are a very accessible way of entering the market and function in a similar way to normal stocks. They are often seen as a more straightforward, and less risky, way of investing your money. Trusting your money to a collection of assets makes your investment more resilient to the individual fluctuations within the market.
If you are a newcomer to the investment world, ETFs may be something to consider. Here’s the one that’s exclusively focused on cocoa:
One rather common way of investing in a commodity is through stocks. Due to cocoa’s market popularity, there are a variety of companies for you to choose from. Some of the most recognizable names include:
Even though companies like Nestle and Hershey are often recommended as solid investment choices, investing in stocks still requires some market knowledge. While ETFs can dilute strong performance from a few outstanding stocks, they are inherently diversified and may offer some protection against company-specific risks.
A more complex type of investment for cocoa growers, large buyers, advanced investors and speculators, buying futures allows you to directly buy large quantities of cocoa at an agreed price to receive at a later point in the future. Whether you make great returns on your investment or lose money depends heavily on the movements of the market.
Futures are direct but risky. They’re vulnerable to market fluctuations, so they rely heavily on the buyer’s knowledge. This type of investment can punish the buyer just as easily as rewarding them, so market newcomers may want to gain some experience first.
If you’re interested in trading futures contracts, check to see if your brokerage allows futures trading or choose one of the handful that does. You’ll probably also have to access a separate section of the trading platform, as futures and stocks are listed on separate exchanges.
Cocoa’s global popularity makes it a massive commodity and a popular investment in the market. Even so, there are risks involved in any investment, cocoa included:
You can invest in cocoa by purchasing ETFs, stocks or futures. But before you commit, familiarize yourself with the risks of investing in this commodity, as cocoa is vulnerable to political and environmental shifts.
Compare your investing options across commodities and trading platforms before you buy.
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