Energy & Commodity ETFs

The price of commodities such as oil, gold, cotton, soybeans and cattle plus other trading sectors, are subject to regular news bulletins, these are an investment arena where only a minority of investors have the physical cash or level of knowledge to be able to confidently make direct investments in these physical commodities.

This is where exchange traded funds that invest in commodities come into play, as they offer you a convenient and cost-effective way of gaining access to these markets.

There are two distinct investment methodologies to consider when it comes to trading commodities ETFs.

The first is to invest directly in the physical commodity via an ETF, and the other is invest in an ETF that buys derivatives. You will find that the majority of commodities ETFs opt for the derivatives route, due to the physical challenges attached to holding and trading large quantities of the commodity in question.

Irrespective of whether you hold contracts or physical commodities, ETFs do offer the opportunity to build a diversified exposure to various different commodities in the a cost-effective and efficient way.

You should always take into account the fact that while commodity ETFs do offer you the chance to utilise a variety of investment strategies and exposures, they do also come with some unique risks that you need to be aware of, such as the spot price (the price of the physical commodity) is not always reflected in the price of a commodity ETF.

It is always a good idea to spend some time learning about the respective nuances of certain commodity ETFs as well as looking at the performance figures.

These are the current top-rated combined Energy and Commodity ETFs

  1. Guggenheim S&P Global Water Idx ETF

2. iShares Global Clean Energy ETF

3. First Trust ISE Glb Wind Energy Idx

4. PowerShares Global Clean Energy

5. Market Vectors Global Alt Enrgy ETF

6. United States Short Oil Fund

7. PowerShares Global Water Portfolio

8. Market Vectors Solar Energy ETF

9. ProShares UltraShort Gold

10. Guggenheim Solar ETF