commodity

Assets that can be grown, raised, drilled or mined. Commodities include agricultural products (e.g., grains), metals (e.g., copper), and energy (e.g., oil). Commodities can be purchased either directly or indirectly through a fund or a futures contract. Commodities do not provide any income stream; rather, their value depends on what a buyer is willing to pay. Commodities are perceived as a hedge against inflation, since their prices should rise as the value of a dollar weakens. However, supply and demand, as well as other factors, can prevent commodities from rising in reaction to higher inflation. Commodities are very risky, and it is possible to lose all of one’s investment—this is particularly true with futures.