Commodity ETFhttp://www.cakefinancial.com
Today’s energy markets are booming, fueling demand for new ways to invest in the sector—and making commodities ETFs more and more popular.
First, let’s review how ETFs, or exchange-traded funds, work. These investment vehicles, like mutual funds, hold assets, such as stocks or bonds. But, unlike mutual funds, they trade on an exchange, like stocks.
Commodities ETFs are simply ETFs that track commodities, such as precious metals, oil, gas, and crops. Different commodities ETFs do this in different ways. Some hold physical assets, so each share in an ETF might present a specified amount of the asset—say, one-tenth of an ounce of gold. Others track the performance of commodities-related stocks or futures contracts.
Most investors won’t want to make commodities ETFs the bulk of their portfolio—it’s simply too risky. But commodities ETFs can be a good diversifier. That’s because they can help hedge your portfolio against rising ...
