Why Invest in Commodities? This is a common question among investors. A commodity is an economic good, usually a resource, with substantial or full fungibility, meaning that the market treats instances of a commodity as being equivalent or nearly equal. In short, a commodity is a way to make money through the rise and fall of prices in its respective markets. Whether you invest in gold or oil, there is a commodity for you.
Some commodities are profitable, but there are risks as well. While commodities tend to be highly sought after, they can also be very volatile. A COVID-19 pandemic or a global economic expansion can greatly affect commodities. It is important to diversify your assets to minimize risks and maximize returns. Some financial advisers recommend a small allocation to commodities, while others suggest investing a larger portion of your portfolio in these assets during periods of high inflation or hyperinflation.
Besides gold and silver, commodities can be beneficial for your portfolio if you diversify. While you might have heard of energy blue chips, you might not be aware that they include a range of other commodities. For example, the Invesco Commodity Index Tracking Fund (ETF) provides exposure to 14 commodities. You can also invest in agricultural stocks, which provide you with access to crops within the agricultural sector.