Still Time To Latch On To the Commodities Boom

Once you've decided to participate, there are four common ways to gain exposure to the commodities markets.

First, you could open up a futures account and outright buy the CRB index on the NYBOT or the GSCI index on the CME and look to roll those contracts as time progresses.

Second, you could invest in commodity funds that trade the entire basket of futures markets, although many of these have large initial subscriptions and others, like the Rogers fund, have large extra fees to trade them.

Third, you could invest with a managed futures fund. These funds often sport high subscription minimums as well. Moreover, they take biased positions in commodities, trying to beat the basket index's performance over time, much like other managed funds. While many of them succeed in this fast-growing approach, you also run the risk of having a very bad stretch with a 'cold' group - not precisely what you might be looking for if you are just seeking generalized commodity exposure.

Lastly, you could look to buy stocks that mirror commodity price movement. For example, you can buy shares of an agriculture equipment maker if you are bullish on grain prices. These stocks might lag the actual performance of commodities, they can still post strong gains as the underlying commodity rallies.

If you have enough money to meet the minimum costs, and are in it for the long haul, I'd recommend the commodity funds. If you cannot make minimums or are more apt to trade around the commodity space, the commodity-related stocks approach can still be a very useful approach. Back in November, for the same reasons I outline here, I recommended a pair of metals stocks: Yamana Gold (AUY - commentary - Cramer's Take) and Southern Copper (PCU - commentary - Cramer's Take). They have done extremely well and I see no reason to come off these recommendations today.

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At the time of publication, Dicker did not hold any positions in the securities mentioned, but positions can change at any time.

Dan Dicker has been a floor trader at the New York Mercantile Exchange with more than 20 years' experience. He is a licensed commodities trade adviser. Dan's recognized energy market expertise includes active trading in crude oil, natural gas, unleaded gasoline and heating oil futures contracts; fundamental analysis including supply and demand statistics (DOE, EIA), CFTC trade reportage, volume and open interest; technical analysis including trend analysis, stochastics, Bollinger Bands, Elliot Wave theory, bar and tick charting and Japanese candlesticks; and trading expertise in outright, intermarket and intramarket spreads and cracks. Dan also designed and supervised the introduction of the new Nymex PJM electricity futures contract, launched in April 2003, which cleared more than 600,000 contracts last year alone. Its launch has been the basis of Nymex's resurgence in the clearing of power market contracts over the last three years. Dan Dicker has appeared as an energy analyst since 2002 with all the major financial news networks. He has lent his expertise in hundreds of live radio and television broadcasts as an analyst of the oil markets on CNBC, Bloomberg US and UK and CNNfn. Dan is the author of many energy articles published in Nymex and other trade journals. Dan obtained a bachelor of arts degrees from the State University of New York at Stony Brook in 1982.