individual investors may find that these advantages offset the risks in a portfolio weighted toward equities and other traditional securities. Whereas stocks and bonds are generally priced according to how investors anticipate future economic and world events, commodities are generally priced depending on the current supply and demand for basic goods. And commodities are broadly defined as qualitatively undifferentiated goods, since buyers do not distinguish between one supplier and the next. This distinctive feature underlies commodities' relatively low correlation with traditional assets and their historically high correlation with trends in inflation. Moreover, because commodity subsectors such as oil, metal and rubber have a low correlation with one another, investors have the potential to diversify their holdings even more by investing in a commodities index, which may contain a number of subsectors.

Historically, the relative performance of equities and commodities has been cyclical as economies expand and contract. But the unprecedented rise of manufacturing and consumer classes in such populous emerging nations as China and India has triggered worries about the sustainability of world growth and the availability of basic resources.

Until we find new sources of energy to supplement oil and create more efficient ways of producing energy and food to help the world's economies resume healthy growth, com­modities will likely maintain a heightened global profile. In addition, the public sector's demand for capital (including state and local governments) may crowd out private investment in infrastructure. Thus, whenever economic activity starts to recover, the supply bottlenecks of the last business cycle could well resurface.

Investing in commodities
Investments can be linked to a basket of commodities. For more active exposure, an investor might choose a struc­tured product linked to a commodities index such as the Merrill Lynch Commodity Index, the Standard & Poor's Commodity Index or the Dow Jones–AIG Commodity Index. Customized structures, usually reserved for insti­tutional or wealthy investors, tend to be longer-term investments, whereas an exchange-traded commodity fund is more liquid. For qualified investors who prefer actively managed funds, commodities structured as long/short funds might be a better route because they mitigate potential losses by allowing investors to sell short.