Two Ways to Invest in Commodities with ETFs

04/17/2009 10:42 am EST

Focus: COMMODITIES

S. Wade Hansen

Co-Founder, Profiting with Forex (PFX) and Learning Markets

Stock investors no longer have an excuse not to diversify into commodities. Exchange traded funds (ETFs) have made it far too simple to gain exposure to the exciting commodities market to pass up the opportunity.

Of course, when you are looking to gain exposure to commodities in your portfolio through ETFs, you have two choices. As you will see in the "Two Ways to Invest in Commodities with ETFs" video below, you can invest in the commodities themselves or you can invest in companies that deal with commodities.

Invest in a Commodity or a Commodity-Based Company

Two Ways to Invest in Commodities with ETFs In today's market, you have access to literally hundreds of ETFs. Some of these ETFs invest in individual commodities like gold, oil, and corn. Other ETFs invest in companies that make their money by producing commodities, like Archer-Daniels-Midland (ADM), Monsanto Corp. (MON), Exxon Mobil (XOM), and Rio Tinto (RTP).

Each type of ETF has advantages and disadvantages. Typically, when commodity prices are rising and investors are worried about inflation, the ETFs that invest directly in commodities tend to outperform. However, when stocks in general are moving higher, ETFs that invest in companies that deal with commodities tend to do well.

Let's take a look at a few of the choices you have when looking to diversify into commodities.

Agricultural Commodities

Here are two ETFs to consider if you are interested in investing in agricultural commodities. The first ETF invests in the commodity itself, while the second ETF invests in companies related to agricultural commodities.

1) PowerShares DB Agriculture (DBA)
2) Market Vectors Global Agribusiness (MOO)

Metals

Here are two ETFs to consider if you are interested in investing in metals. The first ETF invests in the commodity itself, while the second ETF invests in companies related to metals.

1) PowerShares DB Base Metals (DBB)
2) Market Vectors Steel (SLX)

Energy

Here are two ETFs to consider if you are interested in investing in energy. The first ETF invests in the commodity itself, while the second ETF invests in companies related to energy.

1) PowerShares DB Energy Fund (DBE)
2) iShares Dow Jones US Energy Sector Index Fund (IYE)

Watch the video below for more information:

By S. Wade Hansen of PFXGlobal.com and LearningMarkets.com

 

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