3 Commodities to Invest in (2024)

Any savvy investor knows you can't put all your eggs in one basket. Even though it may not cut out risk entirely, diversifying your investment portfolio can help you reach your investment goals by maximizing your returns.

There are plenty of different investment vehicles for you to choose from including stocks, bonds, commodity-centric mutual funds, futures, and currencies. These can be broken down even further, grouping together assets that share characteristics: large-cap stocks, financials, and government bonds are just a few examples.

And don't forget commodities. These are basic goods that can be transformed into other goods and services. There are a number of different commodity investments for both new and experienced traders. But before you head out to make the leap, here are a few important things you need to know about commodity investing, including the best ones to consider.

Key Takeaways

  • Investing in commodities can provide investors with diversification, a hedge against inflation, and excess positive returns.
  • Investors may experience volatility when their investments track a single commodity or one sector of the economy.
  • Supply, demand, and geopolitics all affect commodity prices.
  • Investors can trade commodity-based futures, stocks, ETFs, or mutual funds, or they can hold physical commodities such as gold bullion.
  • Three of the most commonly traded commodities include oil, gold, and base metals.

How to Invest in Commodities

You can invest in oil, gold, or base metals by buying individual stocks, exchange-trading funds (ETFs), or mutual funds that focus on those sectors. But there are other ways to go:

  • Oil futures are a favorite of day traders and are bought and sold through brokerages that specialize in futures trading. This is volatile stuff and not for the faint of heart.
  • Gold investors can purchase bars, coins, or jewelry, and stash them in a safety deposit box.
  • Base metals like aluminum, zinc, and copper are valuable only in huge quantities. The best way to invest in them is through the stocks of producers like Alcoa and U.S. Steel, or through ETFs.

What Is Commodity Investing?

Commodity trading goes back centuries, even before stocks and bonds exchanged hands. It was a very important business, linking different cultures and people. From spices and silks in the early days to the exchanges where these assets are now traded, commodities are still popular investment vehicles.

Investors hoping to get into the commodity market can do so in several different ways. Commodity-hungry investors can consider investing directly in the physical commodity or indirectly by purchasing shares in commodity companies. These companies are accessible through several mutual funds or exchange traded funds (ETFs).


One of the biggest benefits of investing in commodities is the fact that they tend to protect investors against the effects of inflation. Generally, demand for commodities tends to be high during periods of high inflation, which pushes up prices. It's also a good bet against the U.S. dollar; so when the greenback declines, commodity prices rise.

Aside from the benefits of diversification, there is the potential to maximize returns with commodity investing. Although commodity prices are subject to fluctuations in the market through exchange rates, interest rates, and the global economy, global demand is strong. This has an overall positive impact on the stocks of companies that deal specifically with commodities, which can translate to positive returns for investors.

Unique Risks

One thing to keep in mind is that commodities tend to be much more volatile than other kinds of investments, especially funds that track a single commodity or a specific sector of the economy.

Investors who trade futures should remember that it involves speculation. Futures contracts involve tracking an underlying commodity or index. This could have an impact on the performance of the contract and thus give the investor a negative (or positive) difference.

Futures also come with their own set of unique risks that must be managed independently of the underlying commodity.


  • Protect against inflation

  • Diversify a portfolio

  • Hedge against a decline in the base currency

  • Help hedge price risk


  • Increased volatility when compared to other investments

  • Margin trading in commodities potentially resulting in significant losses

  • Speculative nature of trading with uncertainty of the outcome

Futures markets are regulated by the Commodity Futures Trading Commission (CFTC).

Crude Oil

If you have crude oil in mind, it helps to know what shapes prices and how you can invest in this commodity. After production, crude oil is refined into many different products, including gasoline that is used to fuel vehicles. But it goes beyond just gas. Products made from petroleum include plastics, medicines, linoleum, shingles, ink, cosmetics, synthetic fibers, solvents, fertilizer, asphalt, and thousands of others.

But what affects prices? Crude oil generally reacts to the laws of supply and demand. When demand exceeds supply, prices tend to rise. When demand wanes and supply remains fairly consistent, prices tend to fall. For instance, when gas is in high demand—say, during the summer driving season—the price at the pumps rises, translating into higher crude oil prices.

Similarly, demand from developing nations such as China and India—whose economies are still growing—is also pushing up prices. Geopolitics also has a big impact on the price of crude oil. Tensions in the Middle East, where much of the world's oil is produced, can send oil prices skyrocketing.

Oil prices were once greatly influenced by the producer cartel OPEC, made up mainly of Middle-East countries. In the early 21st century, the development of new technology, particularly hydro-fracturing (fracking), created a second U.S. energy boom, largely decreasing OPEC's importance and influence. Today, the U.S. is the largest net producer of crude oil in the world.

How to Invest in Crude Oil

Investing in physical crude oil isn't as easy as investing in other commodities; you can't just buy a barrel of oil. As an investor, you may consider futures; the most direct method of owning the commodity outright. But futures can be highly volatile and need a good deal of capital. And they also require a great deal of knowledge, so it's not really a good option for novice investors.

Investors may consider purchasing stocks in oil companies, crude oil mutual funds, or even ETFs. These vehicles trade on exchanges just like stocks, so they're easy to come by. The U.S. Oil Fund is one example. It tracks the movement of West Texas Intermediate light, sweet crude oil.

Other options include buying shares in mutual funds or energy sector ETFs, which invest directly in oil company stocks. These options tend to come with lower risks because they have more diversified offerings.


The gold market boasts diversity and growth. It's used in jewelry, technology, by central banks, and investors, giving rise to its market at different times within the global economy. The precious metal has traditionally been a safe investment and a hedge against inflation. When the U.S. dollar goes down, you can bet gold prices will go up.

Just like crude oil, when there's an increase in demand, the same happens to the price of gold. Furthermore, prices are affected when central banks—which hold gold—decide to diversify their monetary reserves by buying more gold.

How to Invest in Gold

Unlike crude oil, investors can take possession of the physical commodity. Investors who want to hold the physical commodity can do so by purchasing gold bullion bars or coins. But this means having to pay to store it in a deposit box, vault, or another safe place.

Another option, just as you would for crude, is to go through the futures contract. Contracts require investors to deposit an initial margin. But again, there is a risk to this kind of investment. If the price rises, investors will profit; however, if the price drops, the investor stands to lose their money.

Stocks and ETFs, along with mutual fund options are plenty. With gold stocks, investors aren't just limited to producers but also to exploration and mining companies. As usual, it's a good idea for investors to do their homework and see what the operational risks are for each company.

Gold ETFs, on the other hand, provide exposure to the precious metal while tracking its price. For instance, the SPDR Gold Shares ETF gives investors exposure to bullion without having to take possession of it.

Silver often trades similarly to gold, but with a gold/silver price ratio that fluctuates over time.

Base Metals

Base metals are common metals used in commercial and industrial applications, such as construction and manufacturing. Aluminum, zinc, andcopper are good examples. They are relatively inexpensive, and supplies are generally stable because they're commonly found around the world.

But because they are plentiful, prices tend to be much lower than they are for precious metals; however, the increase in the applications of base metals coupled with rising global demand—particularly from China and other developing nations—continues to positively impact prices.

How to Invest in Base Metals

Holding on to aluminum, zinc, and copper may not necessarily be very fruitful. Because of their low prices, investors would have to hold copious amounts of these commodities in order to profit.

Instead, holding stocks in base metals companies like aluminum company Alcoa or a steel company like U.S. Steel is a great way to get a foot in the door. Furthermore, holding ETFs like the SPDR S&P Metals & Mining ETF provides exposure to companies involved in metals and mining.

What Is the Best Way to Invest in Commodities?

The best way to invest in commodities is through commodity ETFs. ETFs allow for ease of trading because they are purchased like stocks, provide diversification, are not traded on margin like futures are, and typically have low expense ratios.

When Should You Buy Commodities?

There is no specific time that constitutes the best time to buy commodities. Commodities are a hedge against inflation, so buying before periods of high inflation is a good investment strategy; however, predicting when inflation will occur can be tough.

A commodity should be viewed as any other investment, taking into consideration an investor's time horizon and risk profile. Buying a commodity when it is at a low price and its future outlook appears strong based on fundamentals is always a good time to buy for a long-term horizon.

How Do I Buy Oil Commodities?

An individual can buy oil commodities by either purchasing an oil commodity ETF, buying the shares of oil companies, or buying oil futures through a brokerage account.

Are Commodities a Good Investment?

Like any good investment, commodities can also come with risks. An investor needs to understand the markets of the commodity in which they wish to trade—for example, the fact that oil prices can fluctuate based on the political climate in the Middle East.

The type of investment also matters; ETFs provide more diversification and lower risks whereas futures are more speculative and the risks are higher because of margin requirements. That being said, commodities can hedge against inflation, and gold, in particular, can hedge against a market downturn.

How Do I Start Commodities Trading?

You can start trading commodities by opening a brokerage account and purchasing shares in the commodity-specific company of your choice or a commodity ETF after you have done your research and determined the specific investments that are right for you.

The Bottom Line

Like any investment, commodities come with their own risks but can still be a great way to diversify your portfolio if you understand the various aspects of the commodity in which you choose to invest.

In addition to the commodities mentioned above, other commodities to consider are other precious metals—platinum, palladium, silver—lithium, cotton, and food products such as coffee, corn, oats, wheat, soybeans, and sugar. But as with all investment decisions, do your research or consult with an experienced broker.

3 Commodities to Invest in (2024)


What are the top 3 commodities to invest in? ›

Three of the most commonly traded commodities include oil, gold, and base metals.

What are the three types of commodities? ›

There are three major types of commodities; agriculture, energy, and metals. These three are differentiated in the means of accessing them. The means of accessing them is based on whether they are hard or soft.

What are 4 different types of commodities that can be traded? ›

Grain, oil, natural gas, beef and gold are some examples of commodities. These help in diversifying the portfolio beyond traditional securities. Those who wanted to trade in commodities can invest through futures contracts, exchange-traded funds options funds.

What are examples of commodities? ›

What are Commodities? Commodities are raw materials used to create the products consumers buy, from food to furniture to gasoline or petrol. Commodities include agricultural products such as wheat and cattle, energy products such as oil and natural gas, and metals such as gold, silver and aluminum.

What commodities should I own? ›

In terms of commodities, gold and oil tend to lead the way judging by their inflation-busting track records. But you can get access to agricultural materials and industrial metals too, through broad commodity ETFs like iShares Diversified Commodity Swap or Lyxor CoreCommodity.

Which commodities to invest in 2024? ›

What we're watching
  • Gold. Foreign central banks continue to be significant buyers of gold to diversify foreign exchange holdings. ...
  • Oil. Oil demand typically falls as the calendar flips from Q4 into Q1 by 1.5–2.5 million barrels per day for seasonal reasons. ...
  • Copper. ...
  • Platinum and palladium.

What is the most bought commodity? ›

What About Crude Oil? Crude oil is by far the biggest commodity market, and oil prices were the talk of the town for much of 2022.

How safe are commodities to invest in? ›

Disclosures. Past performance is no guarantee of future results. There are special risks associated with an investment in commodities, including market price fluctuations, regulatory changes, interest rate changes, credit risk, economic changes and the impact of adverse political or financial factors.

What are the 7 commodities? ›

Estimating the Role of Seven Commodities in Agriculture-Linked Deforestation: Oil Palm, Soy, Cattle, Wood Fiber, Cocoa, Coffee, and Rubber.

What is a commodity in investment? ›

Commodity funds invest in raw materials or primary agricultural products, known as commodities. These funds invest in precious metals, such as gold and silver, energy resources, such as oil and natural gas, and agricultural goods, such as wheat.

What is a commodity and give 5 examples? ›

Some traditional examples of commodities include grains, gold, beef, oil, and natural gas. More recently, the definition has expanded to include financial products, such as foreign currencies and indexes.

Do commodities do well in a recession? ›

What happens to commodities in a recession? As a general rule, when economies slow, industrial outputs decline due to fewer infrastructure projects and house building, causing the demand for commodities to fall and prices to decline.

What is the most common commodity? ›

Some of the most common commodities include copper, crude oil, wheat, coffee beans, and gold. Commodities can be further broken down into two different categories: hard and soft commodities. Soft commodities are those that are grown and cannot be stored for extended periods.

What are cool commodities examples? ›

  • Country of Origin Labeling (COOL)
  • Muscle Cuts of Meat: Chicken, Lamb, & Goat.
  • Ground Meat: Chicken, Lamb, & Goat.
  • Fruits, Vegetables, Peanuts, Pecans, Macadamia Nuts, & Ginseng.
  • Fish & Shellfish.

Which commodity is most profitable? ›

Crude oil ranks as one of the most traded commodities in the world. Commodity traders who had taken long positions on crude oil last year made a lot of money. Crude oil prices decreased in 2020 as a result of COVID-19 and the consequent global lockdowns. However, the rate of immunisations increased in 2021.

What is the number 1 traded commodity? ›

The most traded commodity is crude oil. Crude oil is used in many products, from petrochemicals to petroleum to lubricants to diesel.

What commodity makes the most money? ›

1. Crude oil: Brent crude. Crude oil is one the world's most in-demand commodities as it can be refined into products including petrol, diesel and lubricants, along with many petrochemicals that are used to make plastics.

Which commodity is in the highest demand? ›

10 of the Most Traded Commodities in the World
  • Brent Crude Oil. The first two entries on our list of the most traded commodities in the world should come as little surprise. ...
  • WTI Crude Oil. ...
  • Natural Gas. ...
  • Gold. ...
  • Silver. ...
  • Copper. ...
  • Coffee. ...
  • Sugar.

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