What Are Commodities?
Commodities are basic raw materials that are the same no matter who produces them, like oil, gold, copper, wheat and coffee.
Types of commodities
- Energy: oil, natural gas.
- Metals: gold, silver, copper.
- Farm goods: wheat, corn, coffee, sugar.
- Livestock: cattle, hogs.
What moves their prices
Supply and demand, weather, wars, and the health of the world economy. A drought can push up wheat. A slowing economy can push down oil and copper. Commodities often rise with inflation.
How people invest in them
- Through futures contracts, mostly by professionals.
- Through ETFs that track a commodity.
- By owning shares of producers, like oil or mining companies.
See it in real companies
Open a company to see what it sells and how it makes money.
Related terms
FuturesA deal to buy or sell something later at today's price.
InflationWhen prices rise and money buys less.
ETFOne fund that holds many stocks at once.
DiversificationNot putting all your money in one place.
SectorsThe 11 big groups the market is split into.
RecessionWhen the economy shrinks for a while.