Commodity Index

DEFINITION of 'Commodity Index'

An index that tracks a basket of commodities to measure their performance. These indexes are often traded on exchanges, allowing investors to gain easier access to commodities without having to enter the futures market. The value of these indexes fluctuates based on their underlying commodities, and this value can be traded on an exchange in much the same way as stock index futures.

BREAKING DOWN 'Commodity Index'

There is a wide range of indexes on the market, each of them varying by their components. The Reuters/Jefferies CRB Index, which is traded on the NYBOT, comprises 19 different types of commodities ranging from aluminum to wheat. They also vary in the way they are weighted; some indexes, for instance, are equally weighted and others have a predetermined, fixed weighting scheme.

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RELATED FAQS
  1. Who sets the price of commodities?

    Commodities are extremely important as they are essential factors in the production of other goods. A wide of array of commodities ... Read Answer >>
  2. Can commodities also be investments?

    Learn about the commodities trade and several different ways investors may participate. Find out about some of the advantages ... Read Answer >>
  3. Can mutual funds invest in commodities?

    Learn how investors can use commodity mutual funds to diversify their portfolios, and discover why mutual funds may be less ... Read Answer >>
  4. Do hedge funds invest in commodities?

    Learn about hedge funds that invest in commodities. Read about Commodity Trading Advisors who focus specifically on trading ... Read Answer >>
  5. How can I invest online in oil, gold and other commodities?

  6. Is it possible to invest in an index?

    First, let's review the definition of an index. An index is essentially an imaginary portfolio of securities representing ... Read Answer >>
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