China, India, and South America are growing rapidly. A great way to take advantage of that growth without the risk to stocks is to invest in commodities. Specifically agriculture commodities. That’s because a growing population will need more grain, corn, sugar, and other agriculture related commodities.

There are multiple ways to invest in commodities, but the best way to invest in commodities is by using an Exchange Trading Fund (ETF). The commodity ETFs below are a good starting place for you to review your investments.

FUD – UBS E-Tracs CMCI Food Total Return ETN. The CMCI Food TR measures the collateralized returns from a basket of 11 futures contracts from the agricultural and livestock sectors. The commodity futures contracts are diversified across three constant maturities from three months up to one year. Expense Ratio: 0.65% Market Cap: $42 M Top Holdings: Soybeans, Sugar #11, Corn, SRW Wheat, Live Cattle, Soybean Oil, Sugar #5, Live Hogs, Soybean Meal, Coffee, Cocoa.

RJA – Elements Exchange Traded Notes Rogers International Commodity Index (Agriculture Total Return). The Index represents the value of a basket of 20 agricultural commodity futures contracts and is a sub-index of the Rogers International Commodity Index. Expense Ratio: 0.75% Market Cap: $409 M Top Holdings: Corn, Wheat, Cotton, Soybeans, Coffee, Live Cattle, Sugar, Soybean Oil, Cocoa, Lean Hogs, Lumber, Milling Wheat, Rubber, Canola, Rice, Soybean Meal, Orange Juice, Oats.

JJG – iPath Exchange Traded Notes Dow Jones (AIG Grains Total Return Sub-Index ETN Series A). The Index is currently composed of three futures contracts on grains traded on U.S. exchanges. Expense Ratio: 0.75% Market Cap: $165 M Top Holdings: Corn, Soybeans, Wheat.

COW – Dow Jones-UBS Livestock Sub-index Total Return. The index is currently composed of two livestock commodities contracts (lean hogs and live cattle) traded on U.S. exchanges. Expense Ratio: 0.75% Market Cap: $101 M Top Holdings: Live Cattle (63%), Lean Hogs (37%).

DIRT – iPath Pure Beta Agriculture. The index is comprised of a basket of exchange traded futures contracts, and uses an allocation methodology designed to mitigate the effects of certain distortions in the commodity markets on such returns. Expense Ratio: 0.75% Market Cap: $2 M Top Holdings:Soybeans, Corn, Wheat, Soybean Oil, Sugar, Soybean Meal, Coffee, Kansas Wheat, Cotton.

There are may commodity ETFs for you to invest in. However a corn ETF may have the best growth rate going forward.

Introducing commodities to a investment portfolio might help in diversifying your portfolio whilst offering the some other advantage of inflationary defense. Every single investor knows how efficient it is usually to get a well-diversified portfolio. Whenever a portfolio is very well diversified, some securities will rise under certain conditions, while other securities tumble under precisely the same circumstances. The concept of diversification is to find non-correlated securities which will go up and down in value at diverse moments. An investor will not want “all their eggs in just one basket” (significantly related securities) because there is the potential to lose almost everything abruptly.

Proper diversification may help to protect against numerous risks in the market place. These dangers are known as diversifiable, or unsystematic risk. When an individual company inside your stock portfolio is affected with a firm-specific occurrence for instance a litigation, labor strike, or regulatory action that in a wrong way affects their competitive advantage, that occasion is not going to drastically affect a well-diversified portfolio.

Having said that, there are a few risks that can not be diversified away. These are call non-diversifiable, or systematic risks. Systematic risks are those that affect the complete economy. These can include earthquakes, wars, political events, and others. Generally these scenarios can be difficult to predict, and may have troubling affects on even a well-diversified portfolio.

One kind of systematic risk that could be imagined, and can be hedged against, is inflationary risk. This may be the risk that the profit on your investment strategies will probably be decayed by climbing inflation. As inflation soars, your buying power reduces, i.e. your money you have does not buy as many goods or services. If you have a long-term investment that returns 10%, but inflation increases 5%, in which case you only received 5% on the investment over that time period (in inflation adjusted terms).

So, just how does inflationary risk have an impact on your portfolio, and what else could you do today to secure your investment funds during the time when rising cost of living is booming? If you do have a portfolio consisting entirely of securities, then you certainly must be alright. Business revenues and profits tend to escalate at around a similar pace as the cost of living, since organizations simply increase their prices to combat their soaring costs. Corporations that maintain substantial cash reserves, such as Microsoft, have a tendency to get hit harder by inflation since they lose purchasing power on their cash holdings. By analyzing a company’s fiscal reports, it’s possible to generally forecast how the organization will probably be plagued by inflation.

Inflation will hit an investor who maintains fixed-income securities, for example bonds, very hard. If you buy a 20-year bond yielding 10% for $1,000, then you expect you’ll receive $1,100 in 2 decades, thus earning 10% on the investment. On the other hand, if inflation goes up 7% in those Two decades, then you certainly actually only earned a 3% inflation-adjusted return on your investment.

If you’re investing in a period of “stagflation” then you may need to be a lot more wise with your investments than during times of conventional inflation. Stagflation occurs when prices are increasing, but the overall economy is not expanding. As an example, 2012 is expected to be a year of stagflation. Nations everywhere have gathered significant amounts of financial debt. As these countries have to take up austerity measures in order to stay solvent, global economic growth with fall for many years in the future. At the same time, the large influx of money in the global markets (from central banks simply slinging money at debt issues) is effectively increasing the prices of products and services. All of this shows a textbook example of stagflation. Stagflation affects bonds roughly exactly the same way as regular inflation, as purchasing power minimizes with overall price increases. However, stagflation has a adverse effect on stock values. When an economic system is struggling to grow, demand for products or services are likely to remain low. When need is low and prices are high, organizations are taking on increased costs for working, but are failing to increase revenues and earnings. Thus, a company’s profit margins will probably be negatively affected by stagflation, and their stock price will drop.

As a way to protect against inflation and stagflation, a savvy individual will add commodities to their account. Commodities are a great addition since they’re frequently not highly correlated along with other assets, so they convey a level of diversification. Additionally, commodities have a tendency to surge in price when inflation rises. So, commodities will hedge against the side effects of price increases inside an account.

You can find tons of commodity ETF information online. Just visit CommodityETFHQ.com another good site for information on commodities investing can be foundhere.

How can exposure to commodities, especially precious metals help your portfolio? One main reason is that commodities are not correlated to stocks or bonds. This gives you a leg up in diversifying your retirement portfolio. Commodity ETFs are just as liquid as stocks or bonds, and many have extremely competitive share prices, allowing even small investors to get their feet wet in the commodities market.

Many countries, including the United States, are buried under mountains of debt that they cannot pay off. The only way for these countries to get out of this debt is to default on their debt or to run the printing presses and devalue their currency.If they do devalue their currency you can bet that all commodities will rise drastically in price. But you, my dear friend, you can invest in a commodity etf to ensure your portfolio.

Below are a few commodity ETFs from the precious metal sector.

ETFS Physical Platinum Shares (PPLT). The largest physically backed platinum based commodity ETF on the market, this ETF holds over $600 million in physical platinum bullion.

iShares Silver Trust (SLR). A $10 billion fund, this commodities ETF is similar to GLD in that its holding are made up of physical precious metals, in this case pure silver bullion. While profits this year have been less than spectacular, silver potentially faces a large increase in value due to its increasing popularity as a cheaper alternative to gold circuitry in the electronics industry.

ETFS Gold Trust (SGOL). This commodity ETF, with nearly $2 billion in holdings is issued by ETF securities, this is another physically backed fund. All of its holdings are physical Swiss gold bullion.

As you can see there are lots of investing options out there when choosing to invest in a commodity ETF. Make sure you do your homework and your portfolio will sing!

Before investing in commodities ETFs be sure that you have done research on the best commodity ETF portfolios for your specific risk tolerance.