What are Commodity-Linked Exchange-Traded Funds?
Commodity-linked exchange-traded funds are excellent investment tools for investors who need to hedge against risks or want exposure to actual commodities like agricultural products, precious metals, and energy resources. However, the composition of a commodity-linked exchange-traded fund is slightly different from that of a regular exchange-traded fund.
What Does a Commodity-Linked Exchange-Traded Fund Contain?
Most exchange-traded funds consist of securities related to a specific market index, sector, or region. A regular exchange-traded fund is a collection of securities defined by the fund’s criteria. However, a commodity-linked exchange-traded fund is slightly different.
Why Buy a Commodity-Linked Exchange-Traded Fund?
Are you optimistic about a specific commodity like coal, oil, or gas? Or perhaps you believe that there’s a new innovation that will boost the use of a certain commodity. Buying a commodity-linked exchange-traded fund could position your investment portfolio on the right side of those products.
Why Sell a Commodity-Linked Exchange-Traded Fund?
Your portfolio may have foreign exposure. Does the economy of a country rely on a specific commodity like oil? Mitigate your risks by selling the commodity-linked exchange-traded fund tied to that particular commodity. Or maybe you think bad weather will negatively affect a certain commodity. Get on the bearish side of those products by selling the appropriate commodity-linked exchange-traded fund.
Find a Commodity-Linked Exchange-Traded Fund Near You
If you’re still unsure whether a commodity-linked exchange-traded fund is the right choice for your investment strategy, check out some of the most popular commodity-linked exchange-traded funds and see if they might work for your portfolio. Before you start investing in exchange-traded funds, always conduct thorough research as you would with any investment.
Consult a Financial Professional
If you’re still uncertain about the commodity-linked exchange-traded fund, it’s a matter of calling your broker (unless you’re trading online). And once you’ve made your decision, good luck with all your trades.
Source: https://www.thebalancemoney.com/learn-the-basics-about-commodity-etfs-1214745
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