What type of investment is classified as being in a natural resource?

Investments classified as being in natural resources typically involve the physical assets derived from the earth, such as oil, gas, minerals, and agricultural products. Commodities are a primary example of this category, as they represent raw materials that are traded on exchanges.

When an investor purchases a commodity, they are directly investing in these natural resources, which can be affected by supply and demand factors, market conditions, and geopolitical influences. This distinguishes commodities from other investment options like stocks, which represent ownership in a company, bonds, which are debt instruments, and real estate, which involves investing in physical property rather than transactable goods.

Understanding commodities as natural resources is essential for grasping the dynamics of that market and how these investments can be leveraged to diversify a portfolio or hedge against inflation.