Not all the characteristics of commodity indexes and exchange traded funds (ETFs) are created equal, but do you know the differences between them?
The positive aspects of commodities include a great hedging tool, they provide diversification and have had equity-like risk and return characteristics, according to a number of studies. As a result of this, many new ETFs and exchange traded notes (ETNs) have come to market, giving retail investors more options than ever before, states Living4Dividends at Seeking Alpha.
The downsides of commodities are that they are volatile. But this should not deter an investor from considering commodities as an investment. It’s just important to know what you own, read up on commodities and have a strategy at the ready.
There are a number of ways to get exposure to commodities: you can invest in single-country funds, broad commodity ETFs or single commodity ETFs.
Some ETFs to consider are the following:
- PowerShares DB Agriculture Fund (DBA): up 1.9% year to date.
- iShares GSCI Commodity Indexed Trust (GSG): down 2% year to date
- PowerShares DB Commodity Index Tracking Fund (DBC): up 2% year to date
Kevin Grewal contributed to this article.
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.