Many commodities are struggling to generate positive returns this year and that is particularly true of energy commodities, including oil and natural gas. Investors looking to position for a commodities rebound with exchange traded funds may want to consider those funds with broad-based exposure rather than a product emphasizing a single commodity.
The PowerShares DB Commodity Index Tracking Fund (NYSEArca: DBC), the largest broad commodity-related ETF, can help investors get commodities diversification. DBC, which has $1.95 billion in assets under management, follows the DBIQ Optimum Yield Diversified Commodity Index Excess Return.
DBC “is designed for investors who want a cost-effective and convenient way to invest in commodity futures. The Index is a rules-based index composed of futures contracts on 14 of the most heavily traded and important physical commodities in the world,” according to PowerShares.
Oil plays a pivotal role in DBC’s price action.
“Investors are now presented with the best buying opportunity in energy commodities since before the production-cutting agreement last November among members of the Organization of the Petroleum Exporting Countries (OPEC),” said PowerShares in a recent note. “As I have often said, when it comes to crude oil prices, it’s all about supply. Global demand has shown a consistent trend for 25 years. But when sentiment is shaky, it doesn’t take much to squeeze wary investors from the market. And, true to form, some wary market participants have grown impatient with the delay in the drawdown of US crude oil inventories.”