What are Commodity Mutual Funds?

In the investment world, commodities are any goods that are bought and sold. Investing directly into the commodities market can be an expensive and difficult challenge to those new to the world of investing, however commodity mutual funds are a more simple and easier approach consumers can use to build their financial portfolio.

Typically, investing in commodities are considered a way for investors to hedge their bet against inflation. Three percent is considered to be the annual rate of inflation. So in theory, if you take a dollar and put it away for a year, once time is up it will only be worth .97. But the value of commodities increase with inflation, as they are basic core ingredients to the economy. Commodity mutual funds offer investors the chance to take advantage of this trend.

Like every other investment tool, their a variety of options for investors to consider when they want to expand their portfolio to include commodity mutual funds.

Basic Commodity Funds

  • Commodity Funds – Funds with only direct holdings into specific commodities
  • Commodity Funds That Hold Futures – Commodity futures are the act of buying into a commodity now even though it has not actually been produced yet
  • Natural Resource Funds – Although they do not actually hold actual commodities or their future, exposure to the commodity market is provided by proxy into commodity-related industries such as agriculture and energy
  • Combination Funds – Funds that are constructed of both actual commodities and commodity futures

Like with any other type of fund investment, it will be up to you to conduct all the research required for participating in a commodity mutual fund and other investment accounts.