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Market Intelligence › Basic Terminologies
Behaviour different from equity, and the honest question of allocation
Published by The Retail Trader · AUG 08, 2026 · Derivatives & Commodities
The argument for holding commodities in a portfolio is that they move differently from equity. The argument is sound, but it does not mean every portfolio needs them.
Some commodities do well in periods of inflation, when equity and bonds are both under pressure. This is why they are regarded as a hedge.
But this relationship is not stable — in many periods commodities and equity have fallen together.
Before deciding, ask:
• Whether to take exposure through futures or through funds and ETFs — the cost and risk of the two differ.
• In futures, roll cost makes a long holding expensive.
• Commodities by themselves pay no income — no dividend, no interest.
• Whether you have the time to monitor the position.
In most retail portfolios the commodity allocation should be small, and it should be written down in advance. It should not be a decision taken after looking at recent headlines — because by then it is no longer a diversifier, but one more chasing position.
This article is for education only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics change from time to time with the exchange, SEBI and RBI, so verify every number yourself with your broker or an official source.