If you are willing to invest in commodity ETFs, there is some thrilling news for you. Because in the following article, you’ll find a list of the top 10 commodity ETFs worth investing in 2021, including a complete guide.
There are several indices available to invest with ETFs in a broad basket of commodities. Commodity ETFs give ordinary investors easy and inexpensive access to various commodity markets. Moreover, it enables investors to gain exposure to individual commodities in a simple and cost-effective manner.
There are subindices on single or selected commodity segments, which are usually derived from broad basket indices. Therefore, it is easy for you to find the most suitable ETFs for you by ranking them according to your preferences.
What are Commodity ETFs?
Exchange-Traded Funds or ETFs are funds that traders can trade like a stock. In ETFs trading, you get the chance to buy or sell a pool of assets without buying them individually. A commodity ETF is an exchange-traded fund (ETF) invested in various physical commodities, including natural resources, agricultural goods, and precious metals.
ETFs are made up of a collection of securities linked by a similar investment profile. More particularly, commodity ETFs are futures or asset-backed contracts that track a particular commodity’s performance or group of commodities.
Commodity ETFs are popular as they offer investors exposure to commodities without learning how to purchase futures or other derivative products.
Popular types of commodities include precious metals, such as gold and silver, and oil and gas. According to Investopedia, the annual total expense ratio (TER) of commodity ETFs starts from 0.15% p.a. - 0.60% p.a.
How to invest in Commodity ETFs?
Open a Trading Account
To open a trading account, you must first choose a broker. Once you have your pick according to your needs and goals, it is time to sign up. You have to fill up a form that includes your name, email address, address, profession, experience, etc.
Choose Commodity ETFs
After opening the account, you can see a list of trading assets on the trading platform. Therefore, you can deposit to the broker through the available deposit methods and select your desired Commodity ETFs from the list.
Place Your Trade
When all are set, and the desired asset chart is on, place order follows a suitable strategy and timeframe. In CFD trading, you can take both buy and sell positions in an asset. Therefore, make sure to maintain a risk management system and open the position.
Where Can I Trade Commodity ETFs?
Trading Commodity ETFs is not very complicated; it just requires a broker that supports this type of trading instrument. Often it becomes complex to find a well-regulated broker that includes these facilities. So we listed some brokers below where you can start trading without hesitation.
The broker is the medium that works between the trader and the market, so it’s essential to trade in a good broker. Now it may be your concern to find a good broker. A good broker must be regulated and remains transparent about their service and costs. In other words, a good broker should support all regulatory frameworks to ensure a high-quality trading environment.
They are determined to provide the asset’s curate price to the trader and be transparent about deposit and withdrawal methods (no hidden costs). Most of the time, the good brokers provide research and education support to their traders to remain more profitable in the market.
Lastly, the best brokers must have the best customer support via email, phone number, social media, and live chat.
The Best Commodity ETFs to Buy Now
Commodity ETFs offer various commodities exposure, including metals, oil, grains, livestock, coffee, and sugar. Some Commodity ETFs concentrate on a single commodity, while others offer more broad exposure to many commodities. We are preparing the following top 10 Commodity ETFs list based on their historical performance, liquidity, and the strong team behind them:
- United States Oil Fund (USO)
- Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC)
- iShares Silver Trust (SLV)
- iShares Gold Trust (IAU)
- SPDR Gold Trust (GLD)
- Aberdeen Standard Physical Gold Shares ETF (SGOL)
- GraniteShares Gold Trust (BAR)
- Invesco DB Commodity Trading (DBC)
- iShares S&P GSCI Commodity-Indexed Trust (GSG)
- Aberdeen Standard Platinum Shares ETF (PPLT)
United States Oil Fund (USO)
The United States Oil Fund offers exposure to one of the world's most essential commodities, oil, and potentially has appeal as an inflation hedge. The elimination of lockdown and positive vaccine news may provide an excellent indication to buy this instrument from 83% down.
Investors can make this investment a far better way to profit from a resurgence in oil prices than oil stocks like ExxonMobil or Phillips 66, down about one-third at recent prices.
The expense Ratio of this EFT is 0.79%, and it is very potential for 2021.
Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (PDBC)
Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF is an actively managed exchange-traded fund incorporated in the USA. The Fund tracks the DBIQ Optimum Yield Diversified Commodity Index, which holds a diverse basket of 14 different commodity futures.
With an Expense Ratio of 0.59% and a yearly 8.55% return, it is one of the best commodity ETFs by 2021.
iShares Silver Trust (SLV)
This ETF uses a physically-backed methodology, an idea popularized by ETFs, due to investors growing tired of the complexities of futures contracts and the dangers associated with them. It was founded on Apr 28, 2006, and its yearly return was 50.3%. Moreover, its Expense Ratio is 0.50%, with almost 709.7M shares.
When it comes to physically-backed silver, SIVR and SLV are nearly identical, though SLV does charge a slightly higher expense ratio.
iShares Gold Trust (IAU)
This fund offers exposure to one of the world's most famous metals, gold. It has 1773.7M shares and was founded on Jan 28, 2005. The expanse ratio is 0.25%, and the annual return is 15.36%.
IAU is designed to track gold bullion’s spot price by holding gold bars in a secure vault, allowing investors to free themselves from finding a place to store the metal.
SPDR Gold Trust (GLD)
GLD is one of the most popular ETFs globally, offering exposure to an asset class that has become increasingly important to the asset allocation process in recent years. It was founded on Nov 18, 2004, and its expense ratio is .40%. With a 15.20% yearly return and 397.6 M shares, this is a potential and popular ETF for 2021.
Aberdeen Standard Physical Gold Shares ETF (SGOL)
This fund offers exposure to one of the world's most famous metals, gold. SGOL tracks the spot price of gold bullion by holding gold bars in a secure vault in Switzerland. SGOL has 148.3M shares with an Expense Ratio of 0.17%. It was founded on Sep 09, 2009, and the annual return is 15.45% for this fund.
GraniteShares Gold Trust (BAR)
The GraniteShares Gold Trust (BAR) is one of the lowest-cost, physically-backed gold ETFs on the market. The issuer of this asset is GraniteShares in the precious metal category.
BAR has 61.3M shares with an Expense Ratio of 0.17%. This asset got an annual return of 15.32%.
Invesco DB Commodity Trading (DBC)
This ETF is one of the largest and most popular options for investors looking to achieve broad-based commodity exposure. It was founded on Feb 03, 2006, and the issuer is Invesco in the commodity category. With an expense ratio of 0.85%, this asset got 96.7 M shares. The annual return for this asset is 8.62%.
iShares S&P GSCI Commodity-Indexed Trust (GSG)
This ETF technically offers broad commodity exposure, but the underlying index is tilted heavily towards energy resources issued by iShares and founded on Jul 21, 2006. It got 75.3 M shares with an expense ratio of 0.76%.
Aberdeen Standard Platinum Shares ETF (PPLT)
This fund offers exposure to one of the world's most expensive metals, platinum. This asset got
13.5 M shares with an expense ratio of 0.60%, in the precious metal category. It was founded on Jan 06, 2010, and the annual return of this asset is 16.49%.
Expert Tip on Commodity ETFs
We believe that knowledge and experience is the key to be a profitable trader. When someone invests in some commodity assets, they must know when the supply and demand changes. Retail traders’ should focus on a specific trading methodology with strong money management to remain profitable. Making a constant profit is not that tough with extensive knowledge about the market and the trading asset.
Why Trade Commodity ETFs?
Commodity ETFs give ordinary investors easy and inexpensive access to various commodities markets. It can be constructed in several ways, impacting an investor's risk, return, and tax situation differently.
Commodities are an asset class that is negatively correlated with other asset classes, such as stocks and bonds. Therefore, when stocks and bonds decrease in value, commodities value increases, and vice versa.
Investors are encouraged to hold some portion of their portfolios in commodities as diversifiers and hedge against inflation.
Frequently Asked Questions
No commodity ETF can be counted as number one for all time; this position changes with the trader’s requirement and the demand-supply chain.
It depends on the trader, for instance how much time and money they can invest and their expectations in regards to profit.
Both individuals and institutions invest in commodity ETFs.
Although this is less risky than other funds, it is essential to have sufficient knowledge about the asset before start trading.
Commodity ETFs are popular because they offer investors exposure to commodities without learning how to purchase futures or other types of derivative products.
You can trade commodities nearly 24 hours a day during the workweek.