Commodities in a different package
Commodities, such as oil, gold, food or copper, can be one way to build a strong, diversified portfolio. However, investing in these materials has traditionally required a substantial amount of time, money and expertise.
Traditionally, there have been three ways to access commodities: 1.) You could purchase the physical commodity, like a bar of gold; 2.) You could purchase stock in a commodity-related company, such as an oil company; 3.) You could use futures contracts.
Instead of adding commodities to your portfolio, consider commodity ETFs.
Three ways to add commodity ETFs to your portfolio
- Gold or silver
Gold and silver have historically provided safe havens during periods of global uncertainty. Rather than dealing with the hassle of buying and storing gold bars, you could invest in a gold ETF that is backed by physical gold and can be traded easily at any time during the day through your brokerage account.
- Commodity producers
Consider investing in several commodity-related companies — mining, oil and energy, or agriculture — at once. iShares commodity-producer ETFs are specifically designed to be close to the front end of the production cycle, so they behave more like the underlying commodities themselves.
- A mix of commodity futures contracts
iShares futures-based commodity funds gives you access to more than 20 different types of commodities, including agriculture, energy and metals, in a single trade. iShares CMDT also has the additional benefit of seeking to minimize the cost of rolling* each futures contract, which can add to performance over time.
*”Rolling” a futures contract means closing out a position in an expiring futures contract and establishing an equivalent position in a replacement futures contract on the same commodity.