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While the commodity market is routinely more risky than steadier stocks, they likewise are more lucrative at times. Careful study of how to make money by investing in them is the best way. Commodities are the necessary things in life and are what we cannot live without such as food, heat, feed for our animals and what not. They are the raw materials manufacturers need to make things that we insist on buying. They are real assets as opposed to financial assets. How then do we buy them?

In the world of buying and selling commodities are bought and sold as future contracts. They are unlike stocks in which you own a small part of the company; unlike bonds in that you have not loaned money and expect to be paid back with a guaranteed amount at some future maturity date, commodities work differently. In a way, when buying commodities, you are gamgling on the future. You contract to buy a certain amount by a certain date at a certain price.

Commodities are the necessary things in life and are what we cannot live without such as food, heat, feed for our animals and what not. They are the raw materials manufacturers need to make things that we insist on buying. They are real assets as opposed to financial assets. How then do we buy them?

No matter how large or small the corn crop, the sudden gush of oil, or the bad tomato harvest, you have this contract that tells you this is what you buy at such and such time and at this price. If the commodity you have a contract to buy is worth far more than the price you are obligated to pay, then you in your risk-taking venture will have gained a great deal. You pay the price you are expected to pay and sell your purchase to those demanding this commodity for a higher price.

It could, of course work the other way and the one doing the selling of the futures will be the one to gain and you will be the one to lose. If they have overproduced and their lot is worth far less than what you contracted calls for, they will be glad to have you pay them what you opted to pay. In fact you must. If they have sold lots of future contracts then their gain stands to be quite substantial.

The loss will be yours. In a nutshell this simple explanation is what futures buying is all about. It has as its product expected and hoped for commodities. Of course you will be in the wheeling and dealing part of this risk taking venture and will not be the actual farmer gathering in his harvest. Both of you will, however, be doing a great deal of sweating before the deal is over.

In other words commodity traders sometimes are big gainers and sometimes big losers. That is why it is better, according to Marketwatch.com to allow only five or ten percent of your portfolio to commodities and the rest to be made up of stocks and bonds. This is for both physical commodities - food and cattle and hay and wheat, corn -and resource commodities - hard metals and other resources needed in production.

How are they sold? Sometimes they may be sold as a multiple group of diversified commodities as a single product. In this way there is less risk than buying lots of one commodity. Investment companies selling these are Pacific Investment Management Company, Pimco or Oppenheimer Funds.

How are they measured? They are measured on a commodity index by their returns. One such, Dow Jones Aig community Index tracts returns "from a passive investment in 19 different commodity futures contracts."

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