The Role of Commodity Indices in Investment Strategies

Commodities have long served as an important asset class for diversifying investment portfolios. One popular way to gain exposure to commodities is through the use of commodity indices. These indices track the performance of a specific set of commodities, reflecting price changes in the commodity markets. The two most common types are 'broad-based indices' and 'specific commodity indices'.

In this essay, discuss the role of commodity indices in investment strategies. Include considerations of their benefits and challenges, as well as how they compare to direct investments in commodities.