A commodity is a basic good in commerce that can be exchanged with other commodities of the same type. Whether related to food, energy or metals, they are an important part of everyday life. Commodities are an important way to diversify a portfolio beyond traditional securities- either for the long term, or as a place to park cash during volatile markets. There are several routes to the commodity markets, some of which facilitate participation for those who are not even professional traders.
Today, tradable commodities fall into the following four categories:
- Metals (such as gold, silver, platinum and copper)
- Energy (such as crude oil, heating oil, natural gas and gasoline)
- Livestock and Meat (including lean hogs, pork bellies, live cattle and feeder cattle)
- Agricultural (including corn, soybeans, wheat, rice, cocoa, coffee, cotton and sugar)
Benefits of Commodity Investing
- Inflation Protection.
- Trading on lower margin.
- High returns.
- Hedge against risk taking.