The ETF “invests in near-month natural gas futures contracts trading on the NYMEX in an attempt to proportionately track the price of natural gas,” Morningstar writes in a profile of the fund.
“On many levels, market liquidity and the absence of carrying costs make using futures a better way to invest in natural gas than owning the commodity directly,” the investment researcher noted. “Investors should still endeavor to understand the implications of futures trading because substantial risk is involved and performance will not necessary follow the spot markets.”
U.S. Natural Gas Fund
Full disclosure: Tom Lydon’s clients own UNG.