Commodities stocks represent the shares of companies involved in the extraction, production, or processing of raw materials, such as oil, gold, or wheat. Investing in commodities stocks can provide diversification to a portfolio and serve as a hedge against inflation.
Investing in commodities stocks offers several potential benefits: diversification of portfolio, inflation protection, and exposure to global economic growth. Historically, commodities have exhibited low correlation to traditional asset classes like stocks and bonds, making them a valuable addition to a diversified portfolio. Additionally, commodities often benefit from rising prices during inflationary periods, providing a hedge against the erosion of purchasing power.