Commodities
Commodities are raw materials or primary agricultural products that can be bought and sold, including energy, metals, agriculture, and livestock.
Concept map
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Definition
Commodities are raw materials or primary agricultural products that can be bought and sold, including energy, metals, agriculture, and livestock.
Use case
Used in alternative investments workflows, analysis, and technical interviews.
Judgment check
Useful only when the assumptions and inputs behind the metric are understood.
Deep dive
How to think about Commodities
Commodities provide inflation protection, diversification (low correlation to stocks/bonds), and speculative opportunities. Investors gain exposure via futures, commodity ETFs, physical holding (gold), or commodity producer equities. Contango and storage costs make pure commodity exposure challenging.
Example: A portfolio holds 5% in commodities via a broad commodity index ETF (DBC, GSG). When inflation spikes and stocks fall, commodities often rise — providing hedge. Gold specifically acts as a crisis hedge and currency debasement protection.