Commodities, on the other hand, represent physical goods such as gold, oil, and agricultural products. Unlike traditional financial assets like stocks and bonds, commodities are tangible and can be bought and sold in their physical form. Investors have several avenues for investing in commodities, each with its own set of advantages and considerations.

One way to invest in commodities is to acquire the physical assets directly. For instance, investors can purchase gold bars or coins, invest in oil wells, or buy agricultural land. This approach provides ownership of the underlying commodity but can involve significant logistical challenges, storage costs, and considerations related to the handling and transportation of the physical goods.

Alternatively, investors can access commodities through futures contracts. Futures contracts are financial agreements to buy or sell a specific quantity of a commodity at a predetermined price on a future date. These contracts allow investors to speculate on the price movements of commodities without taking physical possession of them. Futures trading is commonly used by professional traders and can involve substantial leverage, making it a high-risk investment strategy.

Another avenue for investing in commodities is through commodity-focused funds, such as Exchange-Traded Funds (ETFs). Commodity ETFs hold a portfolio of futures contracts or physical commodities and offer investors a convenient and liquid way to gain exposure to commodity price movements. These funds provide diversification across a range of commodities and can be bought and sold like stocks on major stock exchanges. For example, an investor interested in exposure to the price of gold can invest in a gold ETF.