Tuesday, July 05, 2011

How to Invest in Agriculture: Choosing the Best Investment Funds

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People must eat to survive, and in today’s modern digital world only a small fraction of the population is responsible for producing its own food. Since most people must rely on somebody else to plant, harvest, package and distribute food, investments in the agriculture industry are a logical and rational choice. However, investing in agriculture may appear challenging to the unsophisticated, uninitiated or inexperienced. Many agriculture-related investment funds exist, and finding the best is challenging.



Generate a list of agriculture-focused mutual funds. Using any free online mutual fund screener, search for only those funds with the largest percentage of assets invested in agriculture-related companies or sectors.


Determine your risk tolerance. Again using freely available online tools, answer the relevant questions to calculate your threshold for market volatility and understand how your comfort level with price fluctuations should affect the funds you put in your portfolio.


Consider your time horizon. The point at which you anticipate beginning to withdraw money from your portfolio plays a major role in which investment options should be included or excluded from your selection. Shorter time horizons call for safer, more conservative investment choices, while longer time horizons allow for riskier positions.


Narrow the list of funds. Based on the results of the risk tolerance and time horizon questionnaires, remove the agricultural mutual funds whose goals and composition do not match your own time line, intentions and comfort level.


Evaluate past performance. For each fund still remaining on your list, examine its track record and earnings performance for the past five to 10 years. While past performance is obviously no guarantee of future results, it does help provide a clearer picture of which funds have regularly produced positive results. Cross off your list of funds those with consistently inadequate or negative earnings.


Research fund managers. For each fund still left on your list, find out how long the current manager has been overseeing that particular fund. Be wary of funds with managers having less than five years of tenure.



Article originally published on eHow Money (07/05/11)

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