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Christine St Anne is Morningstar's online funds and ETFs editor.

There are a number of ways investors can capitalise on the mining boom. The most obvious strategy is to invest in resource companies and commodities.

The Australian Securities Exchange currently offers a number of exchange-traded funds (ETFs) that specifically focus on commodities and resource stocks.

ETF Securities has two exchange-traded commodities (ETCs) including the ETFS Physical Gold (GOLD) and the ETFS Physical Silver (ETPMAG).

Aii offers three ETFs that track the resources and mining indexes, including the Aii S&P/ASX 200 Resources (RSR), the Aii S&P/ASX 200 Metals and Mining (MAM) and the Aii S&P/ASX 200 Energy (ENY).

Investors have become increasingly interested in tapping into direct commodity investments. ETF Securities has been tracking increasing inflows into ETCs.

CMC Markets chief market analyst Ric Spooner says many investors just think about resource stocks when they think about the mining boom.

"While quality resource stocks are an important part of an investor's portfolio, investing directly in commodities does have its advantages," Spooner says.

"When you invest directly in commodities, you do not take on the risk characteristics of a firm such as those of a mining company," he says.

The valuation of a mining company can be affected by a number of factors, including the cost of production. Costs of production affect a company's profit margin and ultimately its valuation.
 
Colonial First State senior portfolio manager of resources, Renzo Casarotto, calls this "margin compression".

"When a company faces higher production costs than the price of commodities, the equity component of that company comes under margin compression. Here, commodities have an advantage over resource companies," he says.

Spooner says other firms such as agricultural companies can also be subject to supply risks.

"Mother Nature can sometimes produce adverse weather patterns, which can severely restrict the supply of agricultural companies," he says.

Another advantage of having exposure to commodities is inflation protection.

"Some exposure to physical precious metals is a good defence in a portfolio when inflation starts to emerge. Yet you can still have access to growth in emerging markets," Spooner says.

Spooner notes that sometimes the prices of commodities can go up as the price of a resource company falls.

Indeed, the prices of gold companies have recently been significantly lower than the price of physical gold.