Commodity
In short
Raw materials like oil, gold, wheat — traded on futures markets
Commodities are physical goods — oil, gold, wheat, copper. They often rise when inflation spikes (because they ARE what causes inflation). Gold specifically is a safe-haven asset that many investors hold as insurance against financial crises.
Commodities are physical or agricultural goods traded on standardized exchanges. They serve as inflation hedges and portfolio diversifiers (low correlation to stocks). Main categories: precious metals (gold, silver), energy (oil, gas), agricultural (wheat, corn), and industrial metals (copper, aluminum).
Related concepts
- Alternative Investments — Alternative investments are anything outside stocks, bonds, and cash — real estate, hedge funds, private equity, commodities, and crypto. They often have low correlation to traditional markets, improving portfolio diversification.
- Inflation Rate — Inflation measures how fast prices are rising. At 2%, things cost 2% more each year — acceptable. At 8%, your money loses value fast, and the Fed raises rates to fight it, which usually hurts stocks.
- Diversification — If you put all your money in one stock and it crashes, you lose everything. Spread it across 20 different stocks, sectors, and even countries — when one falls, others may rise, protecting your overall wealth.
- Asset Allocation — Asset allocation is how you divide your money between different types of investments. A classic '60/40' portfolio is 60% stocks, 40% bonds. It's the most important decision in investing — determines most of your long-term returns and risk.