How to Buy Coffee Stocks
There are several ways to gain exposure to coffee in the stock market. When most people think of coffee stocks, they probably think of a popular coffee house chain such as Starbucks. While buying stock in a coffee retailer is one option, you can also invest in coffee through an ETF.
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Basics
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Open an account with a brokerage. This is a basic requirement for gaining access to the stock market. There are many brokerage firms to choose from and the application process for most is relatively simple. If you plan on trading stocks frequently, try to find the lowest commission rate. However, higher commissions may be acceptable if a firm offers additional services that you find valuable.
Company Stock
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Buy stock in companies that are involved in the coffee business. This includes companies that harvest and roast coffee beans, wholesalers and retailers. This is an indirect method of investing in the coffee market. Some companies in this category include Starbucks (SBUX), Green Mountain Coffee Roasters (GMCR) and Peet's Coffee & Tea (PEET).
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Coffee ETFs
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Buy a coffee ETF. The most direct way to invest in coffee through the stock market is to buy an exchange traded fund (ETF) that tracks coffee. ETFs are instruments that track a commodity or index but trade like a regular stock. Also, the minimum investment required for coffee ETFs is lower than the minimum investment required to invest through the commodity futures market.
Investment Strategies
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Choose the right strategy for the market. Buying a coffee ETF is a good strategy if you expect the price of coffee to rise. On the other hand, buying stock in retailers is a good strategy if you expect consumer demand for coffee to rise. In fact, rising coffee prices generally have a negative impact on retailers, so it is important to choose the right strategy based on your time for holding the ETF and where you expect coffee prices to go.
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References
- Photo Credit coffee in coffee image by Maria Brzostowska from Fotolia.com
