What is A Commodity?What is a commodity? What is it and how can people actually invest into it to make money or hedge against inflation? Well if you are looking for a simple definition of commodity here it is. A commodity is simply something that has a limited supply, but has a growing demand. For example water is the ultimate commodity because it has a limited supply but an ever increasing demand. Investing in water therefore could be a great way to save for the long term or hedge against inflation. How To Invest in Commodities There are 3 ways to invest into a commodity. You can choose to. 1. Buy The Commodity itself For example if you want to invest into gold you can always go out and buy a block of gold then hold onto it as the value of gold increases. 2. Buy ETFs What are ETFs? They are simply investments that can be bought on the open market and are backed by other investments. For example GLD is an ETF that holds gold, anyone who buys GLD buys a piece of that gold and as the price of gold goes up or down they either make or lose money. 3. Futures Contract This allows an investor to buy a commodity in the future. The commodity futures market is a popular way to not buy the commodity directly, but to buy the right to buy it in the future. Like everything else investing into a commodity can either be good or bad, so doing your research is normally the best situation. |
