How to invest: Gold, oil, and other 'foolish' investments

Gold, oil, and other 'foolish' investments

It's fashionable to invest in commodities these days. But investments without income are subject to the 'Greater Fool' theory – and you might be the greatest fool of all, says Anthony Hilton.

Commodity funds are selling like hotcakes. It's not hard to see why: prices of many commodities – oil, food, gold – are increasing, and they're considered to be both a hedge against inflation and a proxy for emerging market growth.

But look closer and the picture is more complex, argues financial commentator Anthony Hilton. The main drivers behind price rises differ from one commodity to another, and the fact that they coincide is... well, coincidental.

When you buy shares or bonds, you're buying an income stream. But with commodities there is no income stream – you're relying on someone being prepared to pay more for them than you did. This is often referred to as the 'Greater Fool' theory, and all to often the greater fool turns out to be you, says Hilton.

citywire.co.uk