Commodities and the exchange traded funds (ETF) that hold them are in a good position right now. The recent "boom" in commodities has been triggered by the growing economies of China, India and Brazil that have helped raise their prices consistently higher. Gold and oil especially have seen strong demand and significantly higher prices. With increased interest in alternative fuels, corn has experienced tremendous interest and price increases. Another benefit of investing in commodities is that they can help to diversify portfolios because they’re a separate asset class from stocks and bonds, reports Zoe Van Schyndel for The Motley Fool.
Several ETFs and exchange-traded notes (ETNs) invest in commodities. ETNs trade on an exchange but are different than ETFs in many respects. An ETN is a debt obligation of the issuer, which means that the investor faces the credit risk assumed by the provider. An ETN can track the price of a commodity much closer than an ETF can. Some broad-based ETFs and ETNs to consider and their performance year-to-date include:
- iShares GSCI Commodity-Indexed Trust ETF (GSG) – up 20.0%
- iPath Dow Jones-AIG Commodity Index Total Return ETN (DJP) – up 10.4%
- iPath S&P GSCI Total Return Index ETN (GSP) – up 21.7%
- PowerShares DB Commodity Index Tracking Fund (DBC) – up 16.5%
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.