Besides stocks and bonds, another market that investors may be interested in is commodities. Consisting of raw materials ranging from energy products (oil and gas), to agricultural output (soy, corn and other grains, livestock such as pork, beef and chicken) and metals (gold, silver, iron, copper, platinum, etc), commodities have been seen to behave differently than stocks and bonds. For instance, during high inflation, consumer spending reduces, leading to profitability challenges for certain companies. As a result, stock prices may fall. However, the commodities markets may remain high during inflation. In fact, commodities becoming more expensive is a prime driver for inflation – think about how high oil prices impact prices at petrol pumps. Hence, while a stock portfolio may fall during high inflation, a commodities portfolio may continue to do well. Therefore, combining both makes for a good way to balance things out.

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