Recently, I’ve been thinking about one question: why do most people only know how to buy stocks and funds, but know very little about commodities—an investment area that’s just as important? In fact, commodities, like stocks and bonds, are an indispensable part of a global investment portfolio.

First, let’s talk about what commodities are. Simply put, they are bulk goods with large supply, large demand, and high circulation. They are usually located upstream in the industrial chain and affect how the entire economic system operates. The main categories include energy (crude oil, natural gas, etc.), industrial metals (copper, aluminum, iron ore), precious metals (gold, silver), agricultural products (soybeans, corn, wheat), and soft commodities (sugar, cotton, coffee), among others.

Among them, crude oil can be said to be the king of commodities. Its supply and demand are both extremely large, and downstream applications cover every part of daily life—from plastic food packaging, clothing fabrics, and construction materials to gasoline fuel. That’s also why crude oil prices often reflect the overall state of the global economy so well.

However, not all commodities are worth investing in. For example, electricity has large supply and demand as well, but because its transmission range is limited and prices are restricted by region, it’s not very practical for most investors. Commodities that are truly worth paying attention to should have several features: high liquidity, a standardized global pricing mechanism, easy storage and transportation, product standardization, stable and widespread demand, and fundamental information that’s easy to obtain.

Based on these standards, the commodity varieties that are most worth investing in include crude oil, copper, aluminum, gold, silver, soybeans, corn, sugar, and cotton. These are high-quality options with good liquidity, globally consistent pricing, and fundamentals-driven performance.

When it comes to investment methods, for most retail investors, the primary way to participate is through derivatives—especially commodity futures. Each futures contract has a clearly defined underlying asset and expiration date, and investors need to anticipate how the spot price of that commodity will move at some future point in time.

Here’s a very important point: the factors that mainly influence commodity prices are the macroeconomic environment and the supply-demand relationship. I call this fundamental analysis. But fundamental analysis alone isn’t enough—you also need technical analysis to confirm the entry and exit points. Fundamentals tell you the direction and magnitude, while technical analysis helps you find the most precise timing for trading. Both are indispensable.

The example that has stayed with me most is what happened after the outbreak of the COVID-19 pandemic in 2020. As global central banks began quantitative easing, the market saw a “more money than goods” phenomenon—meaning inflation expectations. During that period, commodities experienced a large-scale rally, which was driven by the resonance of the global economic cycle and commodities.

In short, the essence of commodity investing is to re-price the global industrial chain. If you want to participate in this market, the most important thing is to choose mainstream varieties with good liquidity and clear fundamentals, and combine macroeconomic judgment with technical analysis—this is how you can improve your odds of success and control risk.