Commodity ETFs: A Few Ways To Get Exposure

Commodities and their exchange traded funds (ETFs) have become exceptionally popular with investors and for good reason, they provide protection as well as diversification.

As economies around the globe start to recover, the demand for commodities, such as crude oil, gasoline, steel and timber will follow.  Additionally, as emerging nations develop and populations continue to grow, the demand for agricultural-based commodities, such as sugar and cotton, will increase as well.  The problem that lies ahead for investors is accessing some of these commodities, in particular those that hold hard assets.

It turns out, that getting exposure to hard assets with low correlation to other asset classes isn’t as easy as it sounds. Although a host of fairly new exchange-traded products based on commodities are available, the only ETFs backed by physical commodities are in precious metals, reports David Bogoslow of BusinessWeek. This, perhaps could be a reason that many investors turn to commodities ETFs that utilize futures contracts, such as United States Natural Gas Fund (UNG). Be sure to look under the hood when investing in commodity ETFs to know how it’s constructed.

Investors do have the choice to gain exposure to hard asset producers, as well, through such funds as the RVE Hard Assets Producers ETF (HAP), which is up 35.9% year-to-date.

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