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Wednesday, July 12, 2006

Commodity ETFs

When State Street Global Advisors (SSGA) launched streetTRACKS Gold Shares (GLD) in late 2004, it became the first Exchange Traded Fund designed to track a commodity. The Fund provided a cost-effective alternative to retail investors who wish to participate in the commodities market. GLD's launch was so successful that other asset management firms followed SSGA by introducing similar commodity specific ETFs.

Here are other Exchange Traded Funds that attempt to mirror the prices of commodities:

These and other specialty ETFs provide us with a vehicle to hedge against commodity prices and the ability to participate (cheaply) in global investment themes. Just like the US index-based funds (SPY, QQQQ), commodity ETFs trade throughout the day, can be bought on margin and can be shorted like an ordinary stock.

Obviously these offerings carry a higher level of risk. Commodities are inherently volatile so expect the same violent swings on the stock price. Always check the fund's portfolio mix before buying or shorting. For more information you can visit www.mornigstar.com. Good Luck!



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