7. How to Invest Through Commodity ETFs

Commodity ETFs make commodity investing simple. Instead of storing gold bars or learning futures trading, you can buy a single ETF that gives you exposure to oil, agriculture, metals, uranium, and more. Just like buying a stock in your regular brokerage account. There are 3 major types of Commodity ETFs.

1. Equity-Based (Miners)
Holds mining companies; good for medium–long term investors who want industry exposure, not pure commodity price.

2. Futures-Based
Uses futures contracts; suited for short-term traders who want direct price moves but can handle contango/backwardation.

3. Physically-Backed
Holds the actual commodity; best for long-term holders seeking a stable hedge or store of value.

Points to keep in mind while selecting commodity ETFs:

1. Understand the Underlying Index: Check how the index selects and weights holdings. This determines concentration, purity, and overall risk.

2. Purity of Exposure: Higher revenue/operational purity means the ETF moves more directly with the actual commodity price.

3. Liquidity & Trading Costs: Prefer ETFs with strong trading volume and tight bid–ask spreads to minimise slippage.

4. Holdings Breakdown: Check number of holdings and top-weight positions to avoid overly concentrated portfolios.

5. AUM & Fund Size: Larger AUM reduces the risk of fund closure and usually results in better liquidity.

6. Expense Ratio: Lower annual fees help preserve long-term returns, especially in slow-moving commodity cycles.

7. Tracking Difference & Tracking Error: Smaller deviations mean the ETF more accurately matches its index or target exposure.

8. Roll Costs (for Futures ETFs): Contango increases long-term drag, while backwardation improves roll yield.

9. Rebalance Frequency: More frequent rebalancing can change exposure, increase trading costs, and impact_tracking consistency.

10. Premium/Discount to NAV: Choose ETFs that usually trade close to NAV to avoid overpaying.

11. Commodity Sensitivity: Check correlation or beta to ensure the ETF actually reacts to changes in the commodity price.

12. Derivatives Exposure: Know if the ETF uses swaps or options, as these add complexity and counterparty risk.

13. Distribution Yield: For miners, distributions can be irregular; for futures ETFs, yields may be zero or negative.

14. Portfolio Turnover: High turnover increases trading costs and potential tax drag.

15. Volatility & Drawdowns: Commodity ETFs can be cyclical — check past volatility and worst-case losses.

16. Risk Factors: Understand supply, demand, geopolitical, currency, and regulatory risks specific to the commodity.

17. Fund Inception & History: Older funds have more stable performance patterns and established liquidity.

18. Fund House Reputation: Established issuers and market makers reduce operational and tracking risks.

19. Closure & Structural Risk: Small, illiquid ETFs with falling AUM face higher risk of being shut down.

20. Macro & Thematic Fit: Ensure the ETF matches your investment thesis, whether it’s EV demand, energy cycles, or industrial growth.

7.1 Agriculture ETFs

🇺🇸 TAGS - Teucrium Agricultural Fund
Broad agriculture exposure through a basket of major crop futures.

🇺🇸 DBA - Invesco DB Agriculture Fund
Diversified futures-based agriculture ETF covering grains, softs, and livestock.

🇺🇸 SOYB - Teucrium Soybean Fund
Pure-play exposure to soybean futures.

🇺🇸 CORN - Teucrium Corn Fund
Tracks corn futures for focused agricultural bets.

🇺🇸 WEAT - Teucrium Wheat Fund
Single-commodity ETF for wheat futures.

7.2 Copper ETFs

🇺🇸 COPX - Global X Copper Miners ETF
Basket of global copper mining companies.

7.3 Energy ETFs

🇺🇸 XLE - Energy Select Sector SPDR Fund
Large-cap U.S. energy giants

🇺🇸 VDE - Vanguard Energy ETF
Broad U.S. energy sector across large, mid, and small caps.

🇺🇸 XOP – SPDR S&P Oil & Gas E&P ETF
Equal-weighted ETF of oil & gas exploration and production companies.

🇺🇸 IEO - iShares U.S. Oil & Gas Exploration & Production ETF
Market-cap-weighted U.S. E&P basket.

🇺🇸 AMLP - Alerian MLP ETF
Pipeline and midstream energy infrastructure exposure.

7.4 Gold ETFs

🇺🇸 GLD - SPDR Gold Trust
Large, liquid ETF directly backed by physical gold.

🇺🇸 IAU - iShares Gold Trust
Low-cost physical gold ETF for long-term holding.

7.5 Lithium ETFs

🇺🇸 LIT - Global X Lithium & Battery Tech ETF
Lithium miners + battery technology companies in one fund.

7.6 Metals ETFs

🇺🇸 PICK - iShares Global Metals & Mining Producers ETF
Global diversified miners across base metals.

🇺🇸 XME - SPDR S&P Metals & Mining ETF
US-focused metals and mining companies.

🇺🇸 DBB - Invesco DB Base Metals Fund
Futures-based basket of copper, zinc, and aluminium.

🇺🇸 REMX - VanEck Rare Earth/Strategic Metals ETF
Exposure to rare earth and strategic metal producers.

🇺🇸 SLX - VanEck Steel ETF
Pure-play global steel producers basket.

7.7 Natural Gas ETFs

🇺🇸 UNG - United States Natural Gas Fund
Tracks front-month natural gas futures.

7.8 Oil ETFs

🇺🇸 DBO - Invesco DB Oil Fund
Oil futures exposure with an optimized roll strategy.

🇺🇸 USO - United States Oil Fund
Tracks front-month WTI crude futures.

7.9 Silver ETFs

🇺🇸 SLV - iShares Silver Trust
Physical silver-backed ETF.

7.10 Uranium ETFs

🇺🇸 URA – Global X Uranium ETF
Global uranium miners and nuclear fuel cycle companies.

🇺🇸 URNM – Sprott Uranium Miners ETF
High-purity uranium miners + physical uranium exposure via Sprott holdings.

Start your commodity investing journey with the free Commodities Investing 101 course by Rohas Nagpal.