WHAT ARE COMMODITIES? Commodities are raw materials that are sold in bulk, such as oil, wheat, silver, gold, pork bellies, oranges, and cocoa. Onions are specifically excluded from the commodity list, thanks to a 1958 law. Financial commodities include currencies, Treasury securities, and stock indexes. Larger manufacturers buy the commodities they need on the "spot market," where the full cash price is usually paid on the spot. They also hedge future needs by investigating in contracts to buy those commodities in specific amounts at specific times. Speculators typically buy and sell commodities with options and futures contracts. You can track commodity prices in The Wall Street Journal or The New York Times or at a Web site such as Barchart.com, which displays commodity prices on a time-delayed basis. How Can I Invest in Commodities? Not everyone can invest in commodities. Before a brokerage will let you invest in commodities, you’ll have to meet certain net worth requirements and put cash in a brokerage margin account. The good news is that $2,000 of your cash could control more than $20,000 USD in gold or soybeans. The bad news is that if prices move against you, you’ll have to come up with more cash -- or lose your investment. Commodity Prices often swing wildly. So, you can make lots of money or lose your shirt in hours, if not minutes. Never invest money that you can’t afford to lose in commodities. Is The Commodities Market Safe? Commodities trading is one of the riskiest investment activities around, short of buying lottery tickets. Don’t invest in commodity markets unless you have a diversified investment portfolio and you won’t be hurt by large losses that can happen in almost no time. You would do well to consider trading in commodities as more speculation than investing. Is There a Safe Way to Invest in Commodities? You can Buy Commodities -- large quantities of raw materials such as gold, wheat, pork bellies, and cocoa -- with futures contracts. However, investing in commodities is so risky that the Commodity Futures Trading Commission (CFTC) cautions that these investments are not for everyone. The CFTC describes commodities trading as a "volatile, complex, and risky business." Ask anyone who has traded gold, Treasury bonds or crude oil. A somewhat safer way to Buy Commodities is to invest in a mutual fund that buys and sells commodity futures. These funds include the Pimco Commodity Real Return Strategy D (Ticker: PCRDX) or the Oppenheimer Real Asset fund (Ticker: QRAAX). At least, an investment in a fund like these limits your loss to the amount you have invested. What is Margin Buying of Commodities? When you buy commodities on margin, you use a small amount of cash to control a large quantity of raw material, such as wheat, gold or Treasury bonds. You must post an initial margin, depending on the contract, and keep a maintenance margin amount in your account. Because so little cash is needed to control large quantities of goods, margin buying uses leverage to boost your return. But beware -- this strategy is risky. You can lose your entire investment -- or more. Can I Invest in Precious Metals Without Having to Buy Futures or The Metals Themselves? Yes. In fact, streetTRACKS Gold Shares (GLD), an exchange-traded fund that’s tied to the price of gold, was the most successful fund launch of 2004. It’s now one of the most actively-traded ETFs, although the price fell back from a March 2008 peak of $100.44 along with the market crash. The iShares COMEX Gold Trust (IAU) began trading in January 2005. The iShares Silver Trust (SLV) began trading in April 2006. By the end of 2008, according to Stock-Encyclopedia.com, there were at least 32 ETFS that focus on precious metals. What Government Agency Oversees Commodity Futures and Options Trading? The Commodity Futures Trading Commission (CFTC) regulates the markets where commodity futures and options are traded. Its mission is to protect you as an investor from fraud, manipulation and other abusive practices. The commission investigates and prosecutes alleged violations of the rules, such as improper marketing of commodity investments, and it refers criminal activity to the Justice Department for prosecution. You can read about recent enforcement activity and other news on the CFTC Web site. ...Learn how 'Stock Assault 2.0' Gives You Dead-On Stock Picks to Earn You Thousands of Dollars per Month using an Advanced Artificial Intelligence Engine! CLICK HERE! To Your Online Trading Success, A Professional Stocks and Forex Market Trader Dan A.