Top Eight Standout Commodity ETFs for August: Focus on FGDL, USG, and Others
In the world of investing, commodity Exchange-Traded Commodities (ETCs) have been making waves, particularly gold-based ETCs. These financial instruments track a specific commodity by investing in futures contracts and can serve as a hedge against inflation.
One of the appealing aspects of commodity ETFs is their relatively low expense ratios. These annual fees for ETFs, including commodity ETFs, tend to be lower, often around 0.20%. This makes them an attractive option for investors seeking diversification and exposure to additional economic sectors.
However, it's important to note that commodity ETFs, due to their focus on a specific commodity, may carry more risk than well-diversified ETFs. A more focused commodity ETF will likely invest in just one type of commodity, such as gold.
The top-performing gold-based ETCs over the past year include the SPDR Gold MiniShares Trust (GLDM) leading at a 44.26% return. Other strong performers include iShares Gold Trust Micro (IAUM) at 43.88%, GraniteShares Gold Shares (BAR) at 43.82%, iShares Gold Trust (IAU) at 43.68%, VanEck Merk Gold ETF (OUNZ) at 43.68%, abrdn Physical Gold Shares ETF (SGOL) at 43.65%, and SPDR Gold Shares ETF (GLD) at 43.42%.
While past performance of a fund may not indicate future returns, it can provide historical context. It's recommended to look at a fund's long-term performance instead of one-year performance for a sense of its historical performance. Most funds will show their top ten holdings, providing insight into their investment strategy.
Volume indicates the popularity of a particular fund. The process for buying commodity ETFs is similar to buying stocks, requiring the opening of an investment account. Investing in commodity ETFs can help round out an investment portfolio by providing diversification and exposure to additional economic sectors.
On the other hand, commodity stocks, while related, are distinct from ETFs/ETCs. Agnico Eagle Mines Ltd (AEM) had an 81.19% return, Wheaton Precious Metals Corp (WPM) 71.02%, and Alamos Gold Inc (AGI) 70.98% over the last year. These strong performances reflect the robustness of the mining and metals sectors.
In summary, gold-based ETCs dominated the best-performing commodity ETFs/ETCs category, all showing returns around 43-44% over the past year. Meanwhile, some individual commodity companies, particularly in gold mining, have had even stronger returns exceeding 70% to 80% in the same period.
A calculator might prove helpful when comparing the low expense ratios of commodity ETFs, typically around 0.20%, to the returns of individual commodity companies in the gold mining sector, which have exceeded 70% to 80% in the past year. The variety of gold-based ETFs, such as SPDR Gold MiniShares Trust (GLDM), iShares Gold Trust Micro (IAUM), GraniteShares Gold Shares (BAR), iShares Gold Trust (IAU), VanEck Merk Gold ETF (OUNZ), abrdn Physical Gold Shares ETF (SGOL), and SPDR Gold Shares ETF (GLD), all fall under the umbrella of financial tools used for investing in the technology-driven world of finance. These ETFs serve as a form of diversification, providing exposure to the gold market and the commodity sector, but they carry more risk due to their focus on a single commodity.
