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What is a commodity ETF?
A commodity ETF is an exchange-traded fund that invests in physical commodities such as agricultural products, energy sources and metals. Commodity ETFs often grow in popularity when there is global conflict or high inflation, as commodities are always needed by consumers. Luxury goods, in contrast, may be scrapped during difficult times.
If you invest in a broad commodity ETF, it may include some of the following types of commodities:
If you invest in a more focused commodity ETF, it will likely invest in just one type.
Best-performing commodity ETFs
Data is intended for informational purposes only.
Pros and cons of commodity ETFs
Commodity ETF pros
Commodities can help hedge against inflation.
Commodity ETFs may help diversify your portfolio, depending on what you’ve already invested in.
Commodity ETF cons
Commodities are often at the whim of geopolitical and climate events. If you invest in a wheat ETF and there's widespread drought, for instance, your ETF may not perform well.
If you invest too much in any one particular commodity, that may cancel out its diversification benefits.
» Looking for more diversification? Check out the best ETFs