You can invest through a commodity index by using a number of methods. You can choose from five widely followed commodity indexes, and each one is tracked and traded differently.
Consider a few ways you can invest through a commodity index:
Own the futures contracts. One of the most direct ways of tracking the performance of an index is to own the contracts the index tracks. To do this, you must have a futures account.
Invest with a third-party manager. Many money managers use commodity indexes as the basis of their investment strategy. Some of these vehicles include mutual funds, commodity pools, and commodity trading advisors.
Own futures contracts of the index. A few commodity indexes have futures contracts that track their performance. When you buy the futures contract of the index, it’s similar to buying all the commodity futures contracts the index trades!
Make use of exchange-traded funds. ETFs, as they’re known on Wall Street, are a fairly new breed of investment that tracks the performance of a fund through the convenience of trading a stock. ETFs are a popular alternative for folks who don’t want to trade futures.
These are only a few ways you can get exposure to commodity indexes. As commodities become more popular with the investing community, expect to see more ways to get access to indexes. To keep track of all the new developments in index investing, keep checking Commodities Investors LLC.