Fueled by multiple factors, including a vaccine-driven turnaround in global growth and increasing inflation concerns, the broad-based commodities rall

Buy cocoa, not crypto — the case for investing in commodities in 2021

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2021-07-22 01:00:03

Fueled by multiple factors, including a vaccine-driven turnaround in global growth and increasing inflation concerns, the broad-based commodities rally is on white-hot tear.

The Invesco DB Commodity Index Tracking Fund — which looks to achieve diversified commodity exposure — is up 56% over the past year alone.

But before you jump in head first, it’s important to at least know the basics. Commodities trading is a different beast than stocks, with a unique risk versus reward profile, so an extra layer of due diligence is required.

Commodities are the raw materials at the foundation of everyday life: Things that can be mined, drilled or grown and then used to produce the goods we use.

Whether we’re sipping coffee, putting on a new T-shirt or pumping gas into our cars, commodities make it all possible. Which means people’s day-to-day consumption habits have a significant impact on the prices of commodities.

From an investor’s perspective, commodities trading is simply the act of buying and selling these raw materials to either earn a profit or hedge risk.