How to Use Commodities in Your ETF Portfolio | ETF Trends

As oil prices and exchange traded funds (ETFs) continue to rise despite some fundamentals, some have found that it’s a good time for retail investors to start thinking about what commodities might mean to their portfolios.The market is looking like it may be nursing itself back to health, although slowly, so why has oil shot up and advanced so quickly? From an investors standpoint, the rise in oil prices has many pondering the role of commodities within a portfolio once again.

Dave Kansas for The Wall Street Journal reports that the government reported that the U.S. trade deficit unexpectedly widened in March for the first time in eight months. The reason was the rising price of imported oil and the heightened use of it.

The rise in copper prices has also gone up 40%, giving way to the “reflation” trade. The basic notion is that with so much fiscal and monetary firepower aimed at the financial system, the economy is bound to get moving again. The commodity prices are what rally first, as consumers and businesses alike use raw materials and energy the most, as they are basics for functioning.

What does it mean for you if you’re an individual investor? As we begin to see movement in oil, copper and other commodities, it’s wise to have a strategy to get back into the market and be ready for the rebound.

It’s also a good time to bone up on what your options are when it comes to commodities. Read our special report, the ultimate commodities guide, to learn about the various ways you can get exposure to this exciting market. Many commodity ETFs have special tax issues, as well, so be sure that you’re aware of them.

United States Commodity Funds, provider of the popular United States Oil Fund (USO), filed with the Securities and Exchange Commission to launch a new fund that shorts oil under the ticker DNO, reports Index Universe. It seeks to deliver the inverse of USO by shorting oil futures listed on the New York Mercantile Exchange.

  • United States Oil (USO): up 2.3% year-to-date

  • PowerShares DB Oil (DBO): up 19.7% year-to-date

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.