This way of investing is also suitable for beginners. You do not need to buy individual commodities in a complicated way, for example through contracts, and you certainly do not need to handle commodities physically. You only need to buy shares in a fund that invests in your chosen commodity for you. If you are hearing about ETFs for the first time, we recommend first reading in more detail about how and what to invest in using ETFs.
Now let us move on to the seven tips we have for you.
74-89% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you can afford to take the high risk of losing your money.
Oil
Oil is rightly known as “black gold”. Since the 20th century, it has quite literally powered our civilisation. Global industry and households in every country in the world depend on oil.
One of the main advantages of investing in oil is the opportunity to benefit from generally high product prices. How is this possible? Today, a higher oil price is reflected in the prices of almost all products in the world, from baked goods and cosmetics to children’s toys. This is simply because many products are made directly or indirectly from oil. Most other goods, including food, need oil in the form of fuel for distribution.
Let us now continue with the practical part of the article. Broker eToro offers the United States Oil Fund (USO) ETF, which is traded on the New York Stock Exchange. Other ETFs to choose from include Vanguard Energy ETF (VDE) and ProShares Ultra Bloomberg Crude Oil (UCO). This route allows you to invest in oil easily.
You can read more in our complete guide to oil trading. You will learn what types of global oil exist, what highs and crashes this commodity has experienced, and how you can invest in oil in addition to ETFs.
Precious metals – gold and silver
This tip is essentially “two in one”. It covers the two best-known precious metals. Both gold and silver are popular instruments for storing wealth and are increasingly sought after during periods of high inflation. Both metals have maintained their value steadily over the years. According to some experts, gold in particular has huge potential over the next 10 to 20 years.
Probably the best-known ETF that trades gold is SPDR Gold (GLD), available through broker XTB. Alternative ETFs to this fund include iShares Gold Trust (IAU) and Goldman Sachs Physical Gold ETF (AAAU).
For silver, you can buy shares in the following funds. First and foremost, there is the well-known iShares Silver Trust (SLV), recommended by investors and available through broker XTB. Alternatives include Invesco DB Silver Fund (DBS) and Global X Silver Miners ETF (SIL).
Energy
Investing in energy builds on the previous point, which focused on oil. In this case, however, you are not putting all your eggs in one basket. If the price of some energy commodities were to fall, the investment composition of the fund you have selected is diversified, so there does not necessarily have to be a decline, or the declines may not be as significant. This category includes WTI light crude oil, heating oil, petrol and natural gas.
An example of such an ETF is the fund called Invesco DB MS Energy (DBE). Other strongly appreciating ETFs include Invesco DWA Energy Momentum ETF (PXI) and Invesco S&P 500 Equal Weight Energy ETF (RYE). All of these funds offer investors solid results when held over the long term. In addition, in light of current global events, energy prices may easily continue to rise.
Corn
Corn is an agricultural crop with global importance. In addition to food production for people, it is also used as feed for farm animals. It therefore indirectly affects the prices of other products as well.
One of the few ETFs focused on this commodity is the US-based Teucrium Corn Fund (CORN), which you can buy through eToro from as little as one share.
Before buying the ETF mentioned above, study the expected development of the corn price. In the linked article, you will also find the current price of this crop, its historical performance, and an investor overview of what this commodity is used for, which is also worth noting. This will help you assess whether to invest in corn using ETFs.
Wheat
Wheat needs no introduction, as it is one of the basic building blocks of our society’s food supply. Especially in the context of the ongoing war in Ukraine, which is a major wheat exporter, its price is naturally rising. Before buying the ETF listed below, you can read our article on this commodity to study its types and how it is used.
You can invest in wheat by buying the Teucrium Wheat Fund (WEAT) ETF, for example through the web or mobile app of broker eToro.
A green future
In the United States and the European Union, measures intended to secure a green future are being discussed more and more often. Investors can also ride this wave. There are ETFs focused, for example, on so-called “green loans” provided by banks to responsible business owners. Funds in this category also work with “green securities”, meaning shares in companies that meet certain environmental criteria.
Leading green funds include KraneShares Global Carbon ETF (KRBN) and iShares Global Clean Energy ETF (CLN).
In the future, these ETFs have the potential not only to change the world for the better, but also to help provide investors with long-term financial security, for example in retirement.
Diversify
The final tip is very specific because it essentially combines all the previous tips. Investors can simply buy shares in funds that diversify their capital broadly across many different, often strategic commodities.
Diversification is an important strategy mainly because not all the sectors you have invested in will necessarily perform well at all times. This helps you avoid periods when your entire portfolio might struggle if it contained ETFs focused on a single commodity.
Specific examples of ETFs that invest in this way include Invesco Optimum Yield Diversified Commodity Strategy (PDBC) and First Trust Global Tactical Commodity Strategy Fund (FTGC).