Tuesday, March 24, 2009

Investing in Commodity ETFs

A commodity EFT or exchange traded fund, is used to track the price of an individual commodity like silver or gold, or it could also be used to track a basket of commodities, where storage costs could play a factor, or it could buy up futures contracts.

Because commodity futures offer leverage, ETF commodity funds also place extra capital in something like an interest-bearing government bond. That way any dividends paid out can be paid out of that interest from the bonds.

The interest is also used to pay expenses incurred by the commodity ETF.

There is also another debt instrument called a commodity ETN, or exchange traded note, whose price fluctuates with the commodity index it is associated with. There are credit risks with ETNs, which are in effect senior bank notes.

In general, commodity ETFs track commodity production companies; like a mining outfit. Because of that, many factors can contribute to its performance, outside of leverage alone.

Even though we are in a temporary holding pattern for commodity demand, it will resume as soon as the global economy turns around, and then we should see years of significant profits in the overall sector.

This will make all commodity investment very alluring, along with commodity ETFs.

The emerging markets, especially China and India, although including Eastern Europe and Russia, guarantees demand won't subide any time soon, and battles over access to resources will push prices up, as the middle classes in these regions continue to grow.

One thing about commodities that must be kept in mind, is they don't generate income, so prices are the sole purpose for entering into them, including the hedging aspect of commodity prices.

Another important factor is the expenses connected to investing in commodity ETFs. Everything from trading expenses, storage of raw materials and other general charges must be taken into account in the overall picure.

Because most commodity ETFs don't tend to trade as much as regular funds, there could be fewer expenses there, but nonetheless, it has to be watched because it can definitely be the difference between failure and success, depending on the ETFs performance.

As mentioned earlier, like all commodities, a commodity ETF or ETN can offer a hedge against other factors affecting your income, and so if energy prices of some type increase significantly, you can buy into an energy ETF to offset those increase in prices, and hedge against the inflationary pressures.

Finally, whether it's a commodity ETF or ETN, there are very different treatment of taxes on gains, and you do need to consult your accountant to get the whole picture of how your investment will fare if successful.

15 comments:

Anonymous said...

Good day !.
might , probably very interested to know how one can reach 2000 per day of income .
There is no need to invest much at first. You may commense to get income with as small sum of money as 20-100 dollars.

AimTrust is what you haven`t ever dreamt of such a chance to become rich
The company represents an offshore structure with advanced asset management technologies in production and delivery of pipes for oil and gas.

It is based in Panama with affiliates around the world.
Do you want to become a happy investor?
That`s your chance That`s what you really need!

I`m happy and lucky, I started to take up income with the help of this company,
and I invite you to do the same. If it gets down to select a correct companion who uses your savings in a right way - that`s AimTrust!.
I take now up to 2G every day, and my first investment was 500 dollars only!
It`s easy to get involved , just click this link http://ykyticumec.easyfreehosting.com/irupaty.html
and go! Let`s take our chance together to become rich

Anonymous said...

Hi !.
might , perhaps curious to know how one can manage to receive high yields .
There is no initial capital needed You may commense to get income with as small sum of money as 20-100 dollars.

AimTrust is what you need
The firm incorporates an offshore structure with advanced asset management technologies in production and delivery of pipes for oil and gas.

It is based in Panama with structures everywhere: In USA, Canada, Cyprus.
Do you want to become an affluent person?
That`s your chance That`s what you desire!

I feel good, I started to get real money with the help of this company,
and I invite you to do the same. If it gets down to choose a proper partner who uses your funds in a right way - that`s AimTrust!.
I make 2G daily, and what I started with was a funny sum of 500 bucks!
It`s easy to start , just click this link http://xitukejixe.fcpages.com/qytudem.html
and go! Let`s take this option together to become rich

Anonymous said...

Good day, sun shines!
There have were times of troubles when I didn't know about opportunities of getting high yields on investments. I was a dump and downright pessimistic person.
I have never imagined that there weren't any need in large initial investment.
Nowadays, I'm happy and lucky , I begin take up real money.
It's all about how to select a correct companion who uses your money in a right way - that is incorporate it in real deals, parts and divides the profit with me.

You may get interested, if there are such firms? I have to tell the truth, YES, there are. Please get to know about one of them:
http://theinvestblog.com [url=http://theinvestblog.com]Online Investment Blog[/url]

Anonymous said...

Michael Kors market-place [url=http://www.michaelkors--handbags.com/]Michael Kors handbags[/url] store online read hot sales event Michael Kors handbags, Michael Kors established www.michaelkors--handbags.com satches,knuckle down bags, wallets, watches. Emancipated shipping!

Anonymous said...

There is definately a great deal to know about this topic.
I like all of the points you made.

my page; www.howmuchjoy.com

Anonymous said...

Information that informs the public and makes them good citizens is the kind of quality information that one can be proud to call news, and if it ever goes completely out of style,
may the Lord help us, for it will be the end of civilization as
we know it. I have more stuffings in me from yesterday than I
care to think about. All kinds of sports news today are offered live through the television.


Also visit my web-site ... http://playdubstep.com/groups/net-host-information-how-to-stay-up-to-date

Anonymous said...

After exploring a few of the blog posts on your blog, I seriously like
your way of blogging. I saved as a favorite it
to my bookmark site list and will be checking back in the near future.
Please visit my web site as well and tell me what you think.


My web-site; news of the day

Anonymous said...

I blog quite often and I genuinely thank you for your information.
This article has really peaked my interest. I am going to book mark your website and keep checking for new details about once per week.

I subscribed to your RSS feed too.

Also visit my page; akribos Xxiv

Anonymous said...

It's actually a cool and helpful piece of information. I'm happy that you shared
this helpful information with us. Please stay us up
to date like this. Thank you for sharing.

Also visit my weblog ... Akribos Xxiv For Women

Anonymous said...

I really like it when folks come together and share views.

Great blog, stick with it!

Feel free to visit my homepage ... biscuit.nfshost.com

Anonymous said...

This info is invaluable. Where can I find out more?


my web blog - remote control vehicles

Anonymous said...

I'm gone to convey my little brother, that he should also visit this blog on regular basis to obtain updated from hottest news.

My blog :: ミュウミュウ

Anonymous said...

What i don't realize is actually how you are no longer actually a lot more smartly-preferred than you may be right now. You are very intelligent. You know therefore significantly on the subject of this topic, produced me in my view consider it from a lot of varied angles. Its like men and women aren't fascinated unless it's something to accomplish with Lady gaga! Your own stuffs excellent. At all times deal with it up!

Feel free to surf to my site; トリーバーチ

Anonymous said...

Hello there! I could have sworn I've been to this blog before but after looking at a few of the posts I realized it's new to me.
Anyways, I'm certainly pleased I discovered it and I'll
be bookmarking it and checking back regularly!

Here is my page :: men's armitron watches

Anonymous said...

[url=http://www.pro-medstaffing.com/michaelkorshandbagsj4.html][b]michael kors[/b][/url] · Read going to be the conditions and terms and for anyone having to do with your web hosting hire company and always make sure that all your family members are aware of that what you are being able to get and for your moneynothing in line with the for more information about are limited to him / her painting into going to be the bed room scary [url=http://www.legacyinplano.com/michaelkorsoutletj4.html][b]michael kors outlet[/b][/url]