Pork bellies are not just a tasty part of the pig used to make bacon and other pork products -- they're a valuable commodity commonly traded by investors on regulated exchanges. Pork bellies are most commonly bought in the form of futures contracts on commodity exchanges. However, some pork bellies can be purchased on the stock market in the form of exchange-traded funds, or ETFs, which allow people to buy commodities in stock form.
A commodity is any object that can be easily traded among investors. While hundreds of thousands of objects can be considered commodities, only a few hundred are commonly traded on commodity exchanges. Among these are pork bellies, which are sold on the exchanges by producers and purchased either by people looking to resell them or use them in products, or else by investors speculating that their price will rise.
Unless pork bellies are sold off an exchange on the spot market -- in which case the buyer generally has to take immediate delivery of the products -- pork bellies will be sold in the form of futures contracts. Futures contracts entitle their buyer to pick up the commodity to which the contract is linked at a specific time in the future. However, investors can also buy these contracts indirectly on the stock market through exchange-traded funds, or ETFs.
ETFs are funds sold on the stock market that are linked to assets other than portions of businesses. Similar to mutual funds, ETFs are made up of a collection of assets. A person buying a share of an ETF is buying a portion of these assets. Some ETFs are linked to commodities. Instead of buying a futures contract, the person can buy an ETF on the stock market that is linked to these contracts.
As of March 2011, there is no single ETF devoted primarily to the purchase of pork bellies. However, there are a number of ETFs linked to a bundle of commodities, some of which include pork bellies. For information of purchasing these funds, an investor should contact a broker, who will be able to offer him an array of commodity-based ETFs into which he can place his money.
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