Most investors don't have the desire to do the necessary research to intelligently and successfully invest in the commodities markets, so instead, they look to other investment vehicles targeting the sector.
One of those vehicles is a commodity index.
What is a commodity index? First let's look at one of the more well-known equity indices to help you understand - the Standard & Poor's or S&P 500.
While most people may not think about it, they understand the basic premise behind the S&P 500, that it includes a bunch of companies as a basket that is tracked.
Technically speaking, if you're investing in an index, you're in reality investing in securities which represent the particular targeted market segment you're interested in or the index represents.
So the index is simply a mirroring of the components it's measuring, or in other words - it's tracking them.
Most of the decision in investing in an index than is what particular segment of a market is being represented.
The same goes with a commodity index.
One example would be the S&P GSCI, which focuses on "commodity sector returns representing an unleveraged, long-only investment in commodity futures that is broadly diversified across the spectrum of commodities.
" Another would be the Jim Rogers index which he recently launched with Macquarie.
It focuses on the actual price movements and consumption of agricultural products in China.
What's great about a commodities index is they usually represent a basket of commodities, and so diversify in a way that usually will include growth with less risk.
While no one commodity can be a sure bet, in the years ahead, commodities in general will soar to new heights, and those that increase will make up for some that may decrease.
Commodity indices are a great way to invest in the ongoing commodity bull market without having to trust in any single commodity to perform well.