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A pork belly, simply put, is a side of fresh pork. But in a financial context, pork bellies, like lumber and oranges, are considered commodities. Commodities, as the glossary on Yahoo! Finance explains, are fixed physical substances that investors buy or sell, usually via futures contracts. What is a futures contract? Motley Fool explains that they are agreements between two parties to buy or sell a certain amount (say, 10,000 pork bellies or 5,000 pounds of soybeans) for a specified price at a specific date. The price of pork, like the price of silver, has a value that depends upon its availability and demand. An
investor who purchases a futures contract may do so because he or she thinks the price of pork is going to rise. But as the Motley Fool astutely notes, eventually the investor will have to sell it to an actual pork retailer to avoid winding up with a driveway full of bacon. The handy generalist resource Virtual University lists all the officially traded commodities. In addition to commodities, you can also buy futures contracts over the price of various currencies, as well as oil prices, and even the predicted price of the S&P 500. Check the Investing Basics guide at Yahoo! Finance to learn more.
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