What is a commodity?
A commodity is a raw material or a product that has investment value and can easily be bought and sold. Some examples of commodities are oil, natural gas, precious metals like gold, etc.
How can I invest in commodities?
There are 3 main ways to invest in commodities. One, you can Invest directly in a commodity, like buying a bar of gold or a barrel of oil. Two, you can buy shares of exchange-traded funds (ETFs) that specialize in commodities, like the iShares gold trust for gold, or U.S. oil fund for oil. And three, you can buy stocks of the companies that produce commodities, like Barrick gold for gold, and Exxon Mobil for oil.
Where are commodities bought and sold?
Just like stock exchanges, there are many commodity exchanges around the world. Some of the popular ones are Chicago Mercantile Exchange, London commodity exchange, Dubai mercantile exchange and the East Africa exchange.
What are the advantages of investing in commodities?
The main advantage of investing in commodities is they help diversify your portfolio – especially since the price movement of commodities isn’t linked to the movement in the stock and bond market. Another benefit of commodities is that they are essentially a hedge against inflation. If inflation rises, commodity prices also tend to go up, unlike dividend yielding stocks.
Are there any disadvantages of commodities?
The main disadvantage of commodities is that their price can be very volatile, which means it can increase or decrease sharply. This is something you need to be careful about when investing in commodities.
Furthermore, commodity prices heavily correlate to the world economy, so during an economic downturn, it is likely that commodity prices will go down too. However, this can also be an advantage, as commodity prices are likely to go up during an economic boom.
Podcast: What are Commodities and Commodity Investment?
Fun, informative and concise episodes by a 10-year old, breaking down complex financial concepts in a way that kids and beginners can understand. Episodes cover personal finance topics like saving, investing, banking, credit cards, insurance, real estate, mortgage, retirement planning, 401k, stocks, bonds, income tax, and more, and are in the form of a conversation between a cowboy (a finance novice) and his friend, a stock broker. Making finance your friend, only at Easy Peasy Finance.
A little bit about me: I have been fascinated with the world of personal finance since I was 6! I love to read personal finance books, and keep myself updated on the latest by reading various personal finance magazines. My friends often ask me questions about finance because they find it complex and intimidating. That’s what inspired me to start my YouTube channel called Easy Peasy Finance when I was 8, and this podcast 2 years later.
All you need to know about commodities and commodity investing: What are Commodities, How can you invest in commodities, Where are commodities bought and sold, What are the advantages of investing in commodities, Are there any disadvantages of commodities, and more.
Show notes and transcript at: https://www.easypeasyfinance.com/what-are-commodities-and-commodity-investment/