Commodities ETF

Commodity investing may become the hottest investment in the first decades of the 21st century. Right now gold prices have broken the $1000 per ounce barrier for the first time in history. It is predicted that this upward trend in gold prices will continue for the foreseeable future. Oil prices have also started reaching $80 per barrel & it expected that oil price will soon be above the $100 per barrel mark. It may eventually reach the $200 per barrel barrier. If you are interested in investing in commodities than you can invest in a commodity mutual fund Many people are not aware that commodities as an asset class has a lot of potential especially in the 21st century. It is being predicted that the 21st century belongs to the commodities.

This is the simplest way for you to get involved in investing in commodities as the mutual fund portfolio management will be done by a professional manager & you have to do nothing. Just buy the shares of the commodity mutual fund & let its NAV appreciate before you can sell for a capital gain.

Now you must have heard about the Exchange Traded Funds ETFs . ETFs are really hot investments these days. ETFs started off some three decades back but became highly popular as investment vehicles in such a short time.

Now the good thing about investing in ETFs is that they give you the diversification benefits of a mutual fund with very low fees something like 0.7% as compared to 2-4% of the mutual fund. Driven by the growing demand of commodities by the investors many financial institutions are now offering Commodity ETFs.

So how about investing in commodity ETFs? Unlike a mutual fund whose net asset value is calculated at the end of the day & the shares of mutual fund cannot be traded during the day you can go both long or short on ETFs all the time. Something you cannot do with a mutual fund ETFs have the added benefit of being able to trade like stocks giving you the powerful combination of diversification & liquidity. Trade your ETF shares just like you trade your stock shares. Anytime go long or short

This diversification plus liquidity benefit makes an ETF a better investment tool as compared to the mutual fund & the stocks. Now you can find thousands of ETFs in the market on different market sectors stock indexes currencies commodities & so on.

The Deutsche Bank Commodity Index Tracking Fund is listed on AMEX & tracks the Deutsche Bank Liquid Commodity Index. This index is based on a basket of six commodities light sweet crude oil heating oil gold aluminum corn & wheat. The first Commodity ETF in US was launched by Deutsche Bank in the start of 2006.

Now every month a new ETF gets launched. There are a number of Commodity ETFs that track individual commodities like crude oil gold & silver. Do your research on Commodity ETFs you may find a good investment. This ETF invests directly in the commodity futures contract. Now one of the downsides of investing in this Commodity ETFs is that it can be fairly volatile as it based on commodity futures contracts that get rolled monthly. Another downside to this Commodity ETF is that it based on a basket of six commodities only.

Mr. Ahmad Hassam is Harvard University Graduate. Trade Dow Futures . Learn Commodity Trading This & other unique content ” articles are available with free reprint rights.