Commodity ETFs provide a way to take advantage of the returns in this asset class without having to go out and purchase the commodity itself. The three most popular commodity exchange traded funds or ETFs are those in textiles, precious metals and jewelry and silver mining. The returns within these commodity sectors outpace those of other sectors, both within the commodities asset class and throughout other asset classes.

About Exchange Traded Funds (ETFs)

An exchange traded fund or ETF is a fund whose performance is based on the returns of the index that underlies the ETF. In other words, an exchange traded fund that is based on the Russell 2000 stock index, which tracks the performance of 2000 traded company stocks would expect to perform as well as that index does.

An ETF has little management, which makes it a passively managed fund. The fund itself does not actually invest in each of the 2000 stocks that make up the Russell 2000 but in the index that tracks these funds. Therefore the investor is not exposed to the specific portfolio risk associated with the Russell 2000 but the investment risk that comes with buying the ETF, as all investing involves risk including the possible loss of your principal.

Textiles Exchange Traded Funds

Textile traded funds are near or at the top of the performance list of those ETFs that are traded on the NASDAQ trading system. The NASDAQ is the over the counter trading system that most all ETFs are traded through. Textiles are the commodities that include such things like cloth and other items that are woven or knitted. The performance of those indices that track textile stocks have provided good returns and are a popular commodity ETF.

Precious Metals and Jewelry Exchange Traded Funds

Precious metals such as gold and silver that can be made into jewelry such as rings, bracelets and necklaces make up a group of commodities. These ETFs are also top performing ETFs that are found on the NASDAQ. The precious metals and jewelry ETFs are easy to understand by most investors which makes them popular and this popularity in part has fueled the returns and performance of these funds.

Silver Mining Exchange Traded Funds

Silver, more so than gold and oil, is the other commodity ETF that has become popular among investors. Again, the returns for these exchange traded funds and their underlying indices have exceeded the performance of ETFs in other sectors and they enjoy the same ease of understanding for investors like precious metals.

Depending on your portfolio, aversion to risk and time/amount for the investment, a commodity ETF may be the right investment vehicle for you. Be sure to consult with a financial consultant so that you understand the prospectus that must be provided to you. You want to know all of the particulars of what you are investing in, before you buy.

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