Commodities

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In investing, commodities are the basic raw materials, such as aluminum, copper, gold, and silver, used by industry to create products. Commodities can also be agricultural products such as wheat, cattle, soy beans, sugar, cotton, and coffee. Oil is also a commodity. Because the supply and demand for these commodities varies, so will their prices. This means, just like buying securities, an investor in commodities can buy a commodity when it is relatively cheap, sell it when it is expensive, and make a profitable return. The mechanics of investing in commodities are not as simple as those of buying stocks: buying a bushel of wheat is impractical. Therefore investors typically invest in commodity-related equities, commodity index funds, or commodity exchange traded funds. The increased ease of investing in commodities means that commodities are often viewed as a distinct asset class.