What Are Commodities Exchange Traded Funds All About?

Many financial institutions are now offering commodities Exchange Traded Funds, or ETFs. This new breed of ETF enables you to buy into a fund that offers the diversification inherent in a mutual fund, with the added benefit of being able to trade that fund like a regular stock, giving you the powerful combination of diversification and liquidity.

Here is a list of some commodity ETFs:

  • United States Oil Fund (AMEX: USO): The Unites States Oil Fund (USO) is an ETF that seeks to mirror the performance of the West Texas Intermediate (WTI) crude oil futures contract on the New York Mercantile Exchange (NYMEX). Although the ETF doesn’t reflect the movement of the WTI contract tick by tick, it does a good job of broadly mirroring its performance.

  • streetTRACKS Gold Shares (AMEX: GLD): This ETF seeks to mirror the performance of the price of gold on a daily basis. The fund actually holds physical gold in vaults located in secure locations to provide investors with the ability to get exposure to physical gold without actually holding gold bullion.

  • iShares Silver Trust (AMEX: SLV): This is the first ever ETF to track the performance of the price of physical silver. Like the gold ETF, the silver ETF holds actual physical silver in vaults. This is a safe way to invest in the silver markets without going through the futures or physical markets.