How to Invest in Cotton
Cotton is a part of everyday life for almost every population, as this commodity is used in a wide variety of textile products. Cotton is grown in a number of regions throughout the world, including the Americas, Africa, and India.
Cotton has historically exhibited a very low correlation to both stocks and bonds, making it a potentially appealing option for investors looking to smooth overall portfolio volatility. Since it is widely used in textiles, it also has the potential to hedge against inflationary pressures.
Though the physical properties of cotton make it possible to store for extended periods of time, gaining exposure through the physical commodity presents some logistical challenges. Better options include futures contracts, an exchange-traded note, and even stocks of companies engaged in cotton production.
