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Commodities

Do you have any recommendations for a commodities ETF?

Q It seems that commodities should benefit most as we come out of the COVID economy. Do you have any recommendations for a commodities ETF? – Frank S.

A – I can’t find any broadly-based commodities ETFs based in Canada but there are at least 20 available on U.S. exchanges. One example is the iShares S&P GSCI Commodity-Indexed Trust (NYSE: GSG), which was up almost 19% year-to-date as of the time of writing. It invests in a portfolio of commodity futures contracts covering everything from agriculture to precious metals.

But beware. This is high-risk territory. The fund shows a 10-year average annual loss of 9.5% to Jan. 31 and the iShares website warns that the units “are speculative and involve a high degree of risk”. It’s also expensive; the management fee is 0.75%.

In terms of total assets, the largest diversified commodities fund is the Invesco Optimum Yield Diversified Commodity Strategy No K-1 ETF (NDQ: PDBC), with almost $4 billion under management. It too invests in futures contracts, ranging from aluminum to zinc, with a lot of energy-related commodities in the mix.

It’s a newer fund than the iShares entry, having been launched in November 2014. Like iShares, it has performed well in 2021 but the record since inception shows a loss of 5.35% annually. The expense ratio is 0.59%.

I can’t recommend either of these funds, or any of the others I looked at because of the high risk and volatility. But if you’re willing to roll the dice on the belief that commodities are finally emerging from the long, dark night, be my guest. – G.P.