In recent years, commodity exchange traded funds (ETFs) have launched at a furious clip. What does that mean for you?
John Waggoner of USA Today notes that among the benefits of commodity exposure is that they’re an uncorrelated asset class. Bear in mind, however, that low correlation doesn’t mean commodities and stocks move in opposite directions. When investors are worried about falling prices, for example, commodities and stocks can (and have) fall together. [Commodities And Academics In One ETF.]
Since the commodity market does not move in sync with the equity and bond market, the addition of a commodity fund to an investment portfolio is also a good hedge against inflation. [Handling The Quirks of Commodity ETFs.]
- PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC)
- iShares GSCI Commodity Indexed Trust (NYSEArca: GSG)
- PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBA)
John Stephenson for CTV News reports that currencies, real estate, inflation, stocks and bonds are all impacted when commodities are on fire. When demand for commodities is strong, countries rich in natural resources are great places to look for solid investment opportunities, and not just in commodities, but in real estate, currencies, and the stocks of the commodity-producing companies too.
Some resource rich economies that can also be commodity plays include:
- iShares MSCI Chile (NYSEArca: ECH)
- iShares MSCI Canada (NYSEArca: EWC)
- iShares MSCI Australia (NYSEArca: EWA)
Tisha Guerrero 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.