Commodities

Commodities are another asset class and comprise of goods that are mined or extracted from the ground such as copper gold and oil, as well as goods that are produced or grown such as cattle, maze and soy. Commodities tend to be very volatile because they are affected by factors which are extremely difficult to control or predict for example a crop of maize can be completely reliant on weather patterns.

Commodities tend to behave completely independently of stocks and bonds and therefore can act as an additional diversification strategy in a portfolio. Another well-known example of a commodity that tends to behave differently is gold and the US dollar. Historically we have seen that when the US dollar starts to lose value, investors rush to buy gold and the price of gold increases.