Natural resources investing is perhaps as old as mankind itself. Man has always traded in the worlds major natural resources such as coal, lumber gold, silver, and more recently oil and gas. Natural resources investing has a very wide scope and covers everything that is either collected in a raw form, or mined from the earths crust.

There are some compelling reasons that make natural investing quite attractive. Some of these are:

Rapidly Growing Global Infrastructure

Global infrastructural spending is expanding at a fast clip with a lot of construction activity going on. In the past, most of the global spending on infrastructure was driven by the large developed economies. However, in the last decade, BRICS (Brazil, Russia, India, China, and South Africa) as well as other developing economies have become major consumers of construction material such as steel, gravel, lumber, cement and so on. Maintaining all that global infrastructure will result in the demand for these commodities remaining high for many years to come.

Rising Disposable Incomes

As the disposable incomes in developing economies continue to rise, people have more money to spend on things like buying or building their own houses, buying jewelry made of precious metals such as gold and silver, buying more cars that consume more oil and so on. Some natural resources such as oil face a bleak future due to dwindling reserves. Spikes in demand are usually not accompanied by a similar increase in supply, leading to rapidly rising commodity prices.

Store of Value

Although the dollar has become the worlds most dominant currency due to its wide acceptance and relative stability compared to other currencies, a lot of investors still prefer investing in gold and other precious metals, especially in times of economic uncertainty. Whenever there is hyperinflation, the prices of precious metals usually shoot up as people scramble to buy precious metals.

How Can You Invest In Natural Resources?

There are several ways you can invest in the natural resources sector. Some of these include:

Stocks: You can invest directly in the stocks of companies that deal in natural resources such as oil exploration and drilling companies, forestry stocks, and mining stocks among others. Natural resources stocks can be categorized into major groups: juniors and majors. There are two categories of natural resources stocks: juniors and majors. Juniors are pure play natural resource companies that deal exclusively in the upstream (exploration and extraction) aspect of the natural resource they deal in. Most of these companies tend to be very sensitive to the prices of the commodities they deal in. Most also do not pay a dividend, but can give very good return if the price of commodity they specialize in rises rapidly. On the other hand, majors are more diversified and deal in the downstream aspects of the business such as refining and marketing. These companies tend to be less sensitive to the price movements of their commodities, and many pay a dividend.

ETFs: You can invest in natural resource ETFs (Exchange Traded Funds), instead of investing directly in the stocks. ETFs give the investors a broader market exposure for the same amount of investment as stocks.

Futures and Options: Futures and options are a contract-based approach to natural resources trading. These types of investments, however, tend to be complex and are best handled by the experts, such as CTA (Commodity Trading Advisers).

Direct Investment: Investors can buy the natural resources directly, hold it for some time, and later sell it when prices are high. This method of natural resource investing is, however, only suited for investments such as precious metals that have a very high value-to-weight ratio. For bulky commodities such as oil and timber, this method is not suitable.