You can mitigate the portfolio hit from contango by investing in broad-based funds that hold a number of commodities since it is rather unlikely that all the commodities would experience contango at the same time. Christian Magoon, CEO of asset management consultant firm Magoon Capital, suggests investing in equity energy plays like SPDR S&P Oil & Gas Exploration & Production (NYSEArca: XOP), which won’t be affected by contango in oil futures, or diversified commodity funds like the PowerShares DB Commodity Index Tracking (NYSEArca: DBC). [Oil ETFs Surge As $100 Oil Returns.]
You can also look for ETFs that incorporate contango-mitigating strategies, such as PowerShares DB Oil (NYSEArca: DBO) or the newly-launched Teucrium Crude Oil (NYSEArca: CRUD).
For more information on ETFs, visit our ETF 101 category.
Max Chen contributed to this article.