The PowerShares DB Commodity Index Tracking Fund (DBC) is the first exchange-traded fund (ETF) that we will cover in a series of commodity-themed funds.
A commodity is defined as a raw material or agricultural product that can be traded. In financial terms, a commonly includes energy products such as oil and natural gas, metals such as gold and silver, agricultural products such as wheat and all types of meat and livestock.
The most popular way to invest in commodities is through a futures contract, which is an agreement to buy or sell, in the future, a specific quantity of a commodity at a specific price, according to Investopedia. Direct investment in commodities is possible in most brokerage accounts.
However, the commodities futures market can be very volatile, with big price swings not an uncommon occurrence, making it challenging for even experienced traders to do well. This is where ETFs come in.