What is a Commodity?
Basically, a commodity is anything that has an economic value. Things that have a tremendous economic amount that can be mined, extracted, planted, and can be taken care of, such as farm animals. As long as it has a commercial value, then it is a commodity.
What is a Commodity Market?
A commodity market can be a physical or virtual marketplace that acts as a hub of commerce. People can buy, sell, and trade in this place. As of now, 50 major commodity markets all over the globe handle a hundred primary commodities.
Two Types of Commodities
There are two types of commodities: hard and soft commodities. Hard commodities, most of the time, need to be mined or extracted, like gold, copper, and oil. Soft commodities, on the other hand, are livestock and agricultural products such as chicken, pork, wheat, and coffee.
How to Invest in Commodity Market?
Whether you want to test the waters, paddle on it, or take a complete dive, there are specific avenues to start your exposure in the commodity market.
First, do your homework by searching for companies that have exposure to commodities. Take note that it must have an active or decent track record in the commodity market. You may lose your money if this specific area is left unchecked.
Second is through the purchase of index funds, mutual funds, or Exchange Trade Funds in commodities-related companies.
Another way of investing in commodities is through the purchase of future contracts. It is a contract that requires its owner to buy and sell a commodity at a predetermined price on a predetermined date.
In conclusion, investing money in commodities gives beginners a chance to learn the basics of investing. For the seasoned ones, it can expand their portfolios, and if done right, can expect high returns from this venture.
Also read: 3 Advantages of Starting a Coffee Business
