What are ETFs and Commodities?
A security is an investment issued by the government, a corporation, or other organization that shows ownership of debt or equity. These include stocks, bonds, and other certificates. ETFs are also securities.
ETFs
ETF stands for Exchange Traded Fund. An ETF is kind of like a mix between a mutual fund and a stock. ETFs are traded on the stock exchange just like regular stocks, but instead of one company, an ETF is a group of many different companies put together like a mutual fund.
ETFs have similar allure as mutual funds. It’s a great way to diversify your portfolio. ETFs are usually made up of different industries and market segments. Instead of getting stock in Johnson & Johnson, you can get an ETF for the health care industry.
Commodities
Not all investments are securities. Some examples are real estate and commodities. Commodities are physical products such as iron, oil, coal, coffee, sugar, and wheat. Commodities are exchanged on a commodity exchange just like securities. As a commodity trader you ask as a speculator.
When the producer of a commodity notices that the price of what they are producing, such as wheat, has gone up, they might decide to sell it even if it isn’t ready to be harvested yet. This locks in the price for them. This is where you could by it. The price changes depending on the supply and demand for the commodity.
It is important as an investor to diversify your portfolio. You can diversify by including ETFs, commodities, or both in your portfolio. The Wall Street Journal’s Market Watch newsletter can help you with your commodity and ETF trading.