Commodities include resources like crops and livestock, fossil fuels such as oil and coal, and precious metals like copper and gold. And the commodities market is one of the most volatile, since unpredictable natural disasters and world events have a direct impact on prices. Take crops, for example. A drought one year can send the price of a particular crop soaring because scarcity triggers an increase in demand. The next year, a huge surplus could make the price of that commodity fall dramatically. Because of their unpredictability, commodities typically make better long-term than short-term investments [source: Picerno]. The economic uncertainties after the 2008 recession drove up prices of food in the grocery stores and gas at the filling station, which means commodity prices rose as well. Commodities like oil, corn and gold climbed dramatically in 2010, so investors who bought into commodities in prior years have seen impressive returns [source: Wallace].
The safest way for individual investors to take advantage of the rising prices of commodities is to buy into exchange traded funds (ETFs); these are essentially mutual funds that purchase commodities or invest in commodity producing businesses [source: Wallace]. The safest ETFs purchase several different commodities, rather than focusing on one. ETFs can eliminate some of the uncertainty from choosing which commodities might rise and fall at a given moment [source: Picerno].
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