Originally published on: MoneyGeek
Commodities are things. They are such things as oil, livestock, wheat, uranium, and most famously, gold. However, not every ‘thing’ is a commodity. For example, the sweater that your grandma knit is not a commodity. To be a commodity, there must be many of those ‘things,’ and they must be essentially the same ‘thing.’ A pound of copper, for instance, is essentially the same as another pound of copper.
Most commodities trade on a commodity exchange that is separate from a stock exchange. That means you can’t buy a herd of cattle
while sitting in front of your computer through your discount broker.
Sorry. However, you can buy ETFs that hold commodities. Or, you can buy some physical commodities like gold and diamonds, and store
them yourself. For the rest of this chapter, I will focus on the example of gold.
Many people hold gold in their portfolios, and they invest in gold for roughly the same reason people invest in other commodities for the
long term: inflation protection. As such, much of our discussion about gold applies to other commodities as well.
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