What Are The Risks In Commodity Investing?

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When making a commodity investment, many people feel that there really is no safeguard when it comes to possibly running into what is one of the biggest risks in the investment game, fraud. Most investors look at fraud as just one of the things that is a part of the nature of the business. Still, the Commodities Future Trading Commission, or CFTC, has the challenging task of protecting investors (especially new ones) from fraud, along with other regulatory agencies just like them. But, if a person has made up their mind to step into the realm of investing in commodities, the chances of it happening is still there, no matter how careful they are.

   According to the Federal Bureau of Investigation (FBI), commodity fraud is when a commodity is sold illegally. Perpetrators of these activities have a simple game plan – they want to try and get investors to put money into one (which can be any commodity investment from coffee to gold) and make the person think that there will be a very high return on their money. The unsuspecting investor is fooled into believing that there is virtually no risk in putting their hard earned dollars up, when it is actually the direct opposite going on. By the time they find out it is usually too late, and their money is long gone.

   Getting talked into joining a commodities pool is many times the first step in people becoming a victim of fraud after making a huge commodity investment. A commodity pool is basically an enterprise where a number of people do just that, pool their money together in the hopes of coming out on top after a while. The sad part is that the firms these folks trust make the investment sound spectacular, so good in fact that the unaware investor will sometimes even bypass the part where they are supposed to do research on them.

   

 

Sources:

  1. Risks with Investing in Commodities. For Dummies. Retrieved from http://www.dummies.com/how-to/content/risks-with-investing-in-commodities.html
  2. White Collar Crime, Securities and Commodities Fraud. FBI. Retrieved from https://www.fbi.gov/about-us/investigate/white_collar/securities-and-commodities-fraud

Raymond, N. 7 Aug 2015. Ex-President of NY Commodities Investment Pool Pleads Guilty to Fraud. Reuters. Retrieved from http://www.reuters.com/article/2015/08/07/commodities-fraud-skmadison-idUSL1N10I1TJ20150807

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