Commodities — a brief overview

Commodities are raw materials and primary goods: energy (oil, natural gas), metals (copper, aluminium), and agriculture (wheat, coffee, soybeans, cattle). As an asset class they are a classic inflation hedge, because they are the physical inputs whose prices drive inflation.

Why this lesson is deliberately short

Commodities have their own dedicated track in this education centre, which covers contango, backwardation, futures roll, the major contracts and how to trade them. Here we only place commodities within the alternatives landscape — for the full treatment, go to that track.

The essentials for an overview

• Return: highly cyclical, driven by global supply and demand. No income; pure price moves.
• Risk: among the most volatile of all alternatives, with sharp boom-and-bust cycles.
• Liquidity: the listed routes are very liquid.

How a retail investor can access commodities

• Broad commodity ETFs — a basket across energy, metals and agriculture in one listed fund.
• Single-commodity ETFs/ETCs — focused on, say, oil or copper.
• Commodity-producer equities — miners, energy and agribusiness firms (an indirect, equity-correlated route).
• Futures — direct but complex and leveraged; covered properly in the commodities track.

A small broad-commodity allocation is the simplest way to add this inflation-sensitive exposure without taking single-commodity bets.