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Commodity Meaning for Your Portfolio

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The Commodity Meaning on Wall Street

Commodity MeaningThe commodity meaning in use on stock exchanges refers to any asset that satisfies wants or needs. A commodity is distinct from other financial instruments on Wall Street because it is not a share of something abstract, such as a company. When you buy a commodity, you are actually purchasing goods that someone will consume or use at some point in the near future.

Examples of such goods are food crops, energy sources and metals. Commodities are typically natural things that emerge from the Earth and have yet to be refined. Thus, coffee beans and iron ore are commodities but not ground coffee or steel construction beams. Commodities are often on their way to some location in which they will be converted into something else but this is not always the case. Electricity is one odd exception to this definition.

 One of the key aspects of a commodity meaning is its fungibility. A good is fungible if the market deems it equivalent to similar goods produced by other sources. As an example, gold pulled out of the ground in South Africa is considered equivalent to gold pulled out of the ground in Canada. Wheat grown in Russia will nourish you just like wheat grown in the American Midwest.

 What Is a Commodity Meaning for You?

For the investor, a commodity is a potential investment. Many traders like these investments because their value is so apparent. Commodities such as food and energy are inevitably purchased and consumed. There is little chance of complete loss with commodities due to this factor. However, the prices of these goods do fluctuate and therein is the potential for a trader’s profit or loss. Understand a commodity meaning entirely before putting your money into any such investment.

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