Investors often look to commodities to diversify their portfolio or hedge against inflation. Holding commodities directly can be complex and expensive, so investing through exchange-traded funds (ETFs) is a great way to simplify the process.
What are raw materials?
Commodities are goods such as gold, oil, natural gas and various agricultural products. Raw materials are often used as inputs for the production of other products in many different sectors of the economy.
Investing in commodities can provide diversification benefits to a portfolio, as they often move in opposite directions than traditional assets such as stocks and bonds. Many investors also view commodities as a way to hedge against inflation because their prices tend to rise when inflation is high.
Here are some of the best commodity ETFs to consider for your portfolio.
Top Commodity ETFs
*Data as of April 15, 2024
iShares S&P GSCI Commodity-Indexed Trust (GSG)
This fund provides exposure to a broad range of commodities and aims to track the performance of a fully collateralized investment in futures contracts on an index composed of a diversified group of commodity futures.
- 5-year annualized return: 6.4 percent
- Cost ratio: 0.75 percent
- Assets: $1.1 billion
Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC)
This actively managed ETF invests in commodity-linked futures and other instruments that provide exposure to a diverse group of heavily traded commodities. The fund aims to outperform an index composed of commodity futures contracts from the energy, precious metals, industrial metals and agriculture sectors.
- 5-year annualized return: 9.2 percent
- Cost ratio: 0.59 percent
- Assets: $5.1 billion
SPDR Gold Shares (GLD)
This ETF offers investors a relatively cheap way to invest in gold. The ETF is the largest physically backed gold ETF in the world with tens of billions in assets under management.
- Annual return over 5 years: 12.2 percent
- Cost ratio: 0.40 percent
- Assets: $63.8 billion
iShares Silver Trust (SLV)
This fund aims to generally reflect the price movement of silver while providing easy, cost-effective access to physical silver.
- 5-year annualized return: 12.8 percent
- Cost ratio: 0.50 percent
- Assets: $12.6 billion
United States Oil Fund (USO)
The investment objective of the United States Oil Fund is for the daily percentage change in the NAV of its shares to reflect daily changes in the spot price of light sweet crude oil delivered to Cushing, Oklahoma, as measured by the Benchmark Oil Futures Contract. The goal is to stay within 10 percent of the change in the futures contract over the same period for 30 consecutive valuation days.
- 5-year annualized return: -5.2 percent
- Cost ratio: 0.60 percent
- Assets: $1.3 billion
United States Natural Gas Fund (UNG)
The United States Natural Gas Fund is designed to track the movements of natural gas prices. The fund seeks to track daily percentage changes in the price of natural gas delivered to the Henry Hub, Louisiana.
- 5-year annualized return: -30.7 percent
- Cost ratio: 1.06 percent
- Assets: $789.0 million
Invesco DB Agriculture (DBA)
This fund is designed to track changes in a diversified agricultural index composed of futures contracts on some of the most popular agricultural commodities such as cocoa, soybeans, corn, coffee and sugar.
- 5-year annualized return: 10.0 percent
- Cost ratio: 0.85 percent
- Assets: $827.4 million
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making any investment decision. In addition, investors are advised that the past performance of investment products does not guarantee future price increases.
