I have written about publicly traded companies before, but what about publicly traded products? In particular, let us look at products that are traded on the commodities market.
The biggest example of this is in precious metals. There have been several MLM companies come along lately that focus on this market. While there are several reasons I have reservations about this, let's focus on just one, the volatility of the commodities market.
We all know what chaos it is on Wall Street (even when there are not protesters). Markets take huge swings, and make corrections and gains all the time. While it is true that staying the course nearly always leads to long term gains, how hard will it be to sponsor people when prices suddenly drop for one reason or another? Are you good enough to overcome that?
Alright, I agree, gold has been going up and up for years. I have been hearing radio commercials trying to get people to invest in gold for over a decade. My question is, how long can that last? What if the price goes so high most people cannot afford the product? Worse yet, what would happen if the prices fell to a point where your team was losing money on all the products they had purchased previously?
Now, let's look at history for a moment. In early 1980, silver was all the rage. Financial gurus were making all sorts of predictions. Silver got to a high of over $47 an ounce, and many were predicting it would go as high as $100. What they did not realize is, the Hunt Brothers were buying up as much silver as they could in an attempt to corner the market. Several others, who followed their lead, bought as much silver as they could afford. Some were taking out a second mortgage to buy silver. Then, it happened. The Hunts, who owned an estimated 1/3 of all silver not owned by a government, sold it off, flooding the market. Once the selling started, everyone that was following their lead did the same, and prices went into a free fall, which caused a panic, and more selling, and the prices continued to fall.
In the end, silver was almost worthless. 31 years later, it has still never reached the value it achieved just before the crash.
My point in giving these examples is simple. Do you really want to base your future on a commodity that is so volatile? These types of businesses are really popular, and sure, you could build a nice income with them. Just be sure you know what you are getting into.
Fortunes are made and lost on Wall Street every day. Do you want to be a day trader or a network marketer?