For years, investing in commodities was low on the list for most investors, overshadowed by equities and bonds. But recently they have attracted renewed attention from investors looking for diversification, inflation protection and alternatives to traditional assets. So what exactly are commodities, and do they deserve a place in your portfolio?
What are commodities?
Commodities are raw materials or natural resources that are traded globally. Unlike shares or bonds, they are physical goods – the building blocks of the global economy. They include the oil powering transport, the wheat feeding populations, the copper wiring the energy transition, and the gold held as a store of value.
Because commodities are tied to real-world supply and demand, their prices tend to move differently from financial assets. Weather events, geopolitical tensions, economic growth and technological change can all influence commodity prices in ways that have little to do with stock markets. That can make them useful as a way to add diversification to your portfolio.
What commodities can you invest in?
Investors don’t typically buy barrels of oil or sacks of grain directly. Instead, exposure usually comes through funds or exchange-traded products that track commodity prices.
Broadly speaking, commodity investments fall into four categories:
Energy, including oil, natural gas and refined fuels.
Industrial or base metals such as copper, aluminium, nickel and others linked to construction and electrification.
Agricultural commodities, from crops like wheat, corn, and soybeans to soft commodities like coffee and cocoa, to livestock.
Precious metals, principally gold, silver, platinum and palladium.
Most investors access commodities through diversified funds that spread exposure across multiple sectors rather than betting on a single resource.
Why investing in commodities is having a moment
Several forces have pushed commodities back into the spotlight.
First, the return of inflation has reminded investors that real assets matter. Commodities often perform well when prices are rising because they are themselves components of inflation – energy and food costs feed directly into consumer prices.
Second, global supply chains remain fragile. Years of underinvestment in resource production, combined with geopolitical uncertainty, have made supply shocks more common. When supply tightens, commodity prices can rise sharply.
Third, the energy transition is increasing demand for certain industrial metals. Electrification, renewable energy infrastructure and battery production require significant amounts of copper, lithium and other materials.
Fourthly, geopolitical instability and tensions in the middle East have prompted investment in precious metals – seen as a safe haven asset – and oil and gas, amid fears middle-Eastern supply could be disrupted.
Lastly, after a long period where equities and bonds moved broadly upward together, investors are again seeking assets that behave differently from traditional markets.
Moneycube recommends a fund-based approach
Most commodities are bulky and impractical for investors to own direct. Even holding gold directly brings storage and insurance costs. So for investors who want diversified exposure, broad commodity funds provide a straightforward entry point. Funds aim to reflect overall commodity market performance rather than relying on any single price trend.
The Invesco Bloomberg Commodity ETF, which tracks a basket of commodities across energy, metals and agriculture is an attractive option for many Ireland-based investors. This $86 billion fund, up more than 6% in 2026 in Euro terms so far, holds around a third of investor money in oil and gas, a fifth each in grains and precious metals, with the remainder in base metals, livestock, and soft commodities.
Another approach is focusing specifically on precious metals. Gold has long been viewed as a hedge against uncertainty and currency weakness, as we’ve explained elsewhere.
Investors can also gain exposure through physical-backed products or diversified precious metals funds such as WisdomTree Precious Metals, which spreads holdings across a ‘basket’ of multiple metals rather than relying solely on gold. Right now it holds 53% gold, 32% silver, and 15% platinum and palladium.
What role should investing in commodities play in Irish investors’ portfolios?
Commodities are best thought of as a supporting asset rather than a core holding.
One of their main attractions is diversification. Commodity returns are historically less correlated with equities, meaning they don’t always rise or fall at the same time as stock markets. This can help smooth overall portfolio volatility, particularly during periods of inflation or market stress.
They can also act as an alternative to bonds for the non-equity portion of a portfolio. Traditional portfolios often rely on bonds to balance equity risk, but in recent years bonds and equities have sometimes declined together. Commodities offer a different source of return driven by economic and supply dynamics rather than interest rates.
That said, commodities can be volatile, endure long periods of underperformance, and don’t produce income like dividends from shares, or coupons from bonds. Oil prices peaked fifteen years ago. Prices can swing sharply depending on global events, making them unsuitable as a dominant allocation.
For most long-term investors, a modest allocation – typically in the range of 10–20% of a total portfolio – is enough to capture diversification benefits without introducing excessive risk.
Investing in commodities won’t replace equities as the engine of long-term investment growth, but they can play a useful supporting role. In an environment shaped by inflation concerns, geopolitical uncertainty and structural shifts in energy and industry, exposure to real assets may help your portfolio become more resilient.
