Investors often seek commodities as a way to diversify their portfolios or protect against inflation. However, investing directly in commodities can be complex and costly. This is where exchange-traded funds (ETFs) come in handy, offering a simplified and efficient investment option.
Understanding Commodities
Commodities refer to goods like gold, oil, natural gas, and various agricultural products. These items are essential inputs in the production processes across different sectors of the economy.
Adding commodities to a portfolio can bring diversification benefits since their value often moves independently of traditional assets such as stocks and bonds. Additionally, commodities are seen as a hedge against inflation, as their prices tend to rise during periods of high inflation.
If you’re considering investing in commodities, here are some of the top commodity ETFs to explore:
Top commodity ETFs
*Data as of Aug. 22, 2024
Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC)
This actively managed ETF invests in commodity-linked futures and other instruments to gain exposure to a diverse range of heavily traded commodities. The fund aims to outperform an index made up of futures contracts on commodities from the energy, precious metals, industrial metals, and agriculture sectors.
- 5-year annualized return: 9.4 percent
- Expense ratio: 0.59 percent
- Assets: $4.4 billion
iShares S&P GSCI Commodity-Indexed Trust (GSG)
This fund offers exposure to a wide array of commodities and seeks to replicate the performance of a fully collateralized investment in futures contracts on an index comprising a diversified group of commodities futures.
- 5-year annualized return: 6.8 percent
- Expense ratio: 0.75 percent
- Assets: $897.4 million
SPDR Gold Shares (GLD)
This ETF provides a cost-effective way to invest in gold. It is the largest physically-backed gold ETF globally, with assets under management totaling tens of billions.
- 5-year annualized return: 10.4 percent
- Expense ratio: 0.40 percent
- Assets: $68.9 billion
iShares Silver Trust (SLV)
This fund aims to mirror the price performance of silver while offering convenient access to physical silver.
- 5-year annualized return: 10.9 percent
- Expense ratio: 0.50 percent
- Assets: $13.8 billion
United States Oil Fund (USO)
The United States Oil Fund strives to reflect the daily percentage change in its shares’ NAV based on the daily fluctuations in the spot price of light sweet crude oil in Cushing, Oklahoma, as measured by the Benchmark Oil Futures Contract. It aims to stay within 10 percent of the futures contract’s change over 30 consecutive valuation days.
- 5-year annualized return: -4.8 percent
- Expense ratio: 0.70 percent
- Assets: $1.2 billion
United States Natural Gas Fund (UNG)
The United States Natural Gas Fund is designed to track the movements in natural gas prices. It aims to follow the daily percentage changes in the price of natural gas delivered at the Henry Hub, Louisiana.
- 5-year annualized return: -28.1 percent
- Expense ratio: 1.01 percent
- Assets: $840.4 million
Invesco DB Agriculture (DBA)
This fund is structured to reflect changes in a diversified agricultural index comprising futures contracts on popular agricultural commodities like cocoa, soybeans, corn, coffee, and sugar.
- 5-year annualized return: 11.6 percent
- Expense ratio: 0.85 percent
- Assets: $686.3 million
Editorial Disclaimer: It is advisable for all investors to conduct independent research on investment strategies before making investment decisions. Moreover, past performance of investment products does not guarantee future price appreciation.