Different types of commodities to invest in

When it comes to commodities, they are generally split into a few different categories. These are ENERGY commodities: that's things like gas, oil and renewables.

There are METAL commodities: this could apply to anything as there is a market in most, but the more important and well known, not to mention accessible, of the commodity markets relating to metals are those that have been valued and prized for a large part of human history: gold, platinum and many other less expensive but crucial metals now for industry, such as aluminium,

The third type are often called SOFT commodities, and this refers to anything that is a potential food product, so here we're thinking of sugar, cocoa and that sort of thing.

So who would invest in commodities? Well anyone with a diverse portfolio might do so, someone who expects a long term trend to play out over a period of time, or simply someone who wants to add balance to their portfolio if they think something else is going to happen.

To take the classic example, a look at historic gold prices will show that its price has historically been a good foil to inflation. Or if you think industry and building in general is going to suffer for a few years, then you can bet the price of metals that are heavily used in industries is going to all due to basic supply and demand economics, and so forth.

So it can be seen there are several reasons why someone might want to invest in commodities. But of course the prices of them can go up and down considerably in a short period of time, so it is a very risky investment. It is therefore important to research thoroughly, look at historic prices for those commodities and understand the sorts of factors that could potentially influence their price going forwards.

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