Michael AdamsLead Editor, Investing
Michael Adams is lead editor, investing at Forbes Advisor. He's researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world's major financial publications, including Kiplinger, U.S. News and World Report, The Motley Fool and more. Michael holds a master’s degree in philosophy from The New School for Social Research and an additional master's degree in Asian classics from St. John’s College.
Michael Adams
Michael AdamsLead Editor, Investing
Michael Adams is lead editor, investing at Forbes Advisor. He's researched, written about and practiced investing for nearly two decades. As a writer, Michael has covered everything from stocks to cryptocurrency and ETFs for many of the world's major financial publications, including Kiplinger, U.S. News and World Report, The Motley Fool and more. Michael holds a master’s degree in philosophy from The New School for Social Research and an additional master's degree in Asian classics from St. John’s College.
Lead Editor, Investing
Paul KatzeffDeputy Editor, Investing
Paul Katzeff is an award-winning journalist who has written four books about how to grow your 401(k) retirement nest egg and one about internet investing. Before becoming an investing deputy editor with Forbes Advisor, he was a senior reporter/writer at Investor's Business Daily, a correspondent for Money magazine, managing editor of the Boston Business Journal and staff writer for the Boston Herald American Sunday magazine. His work has been featured in The New York Times and The Wall Street Journal.
Reviewed
Paul Katzeff
Paul KatzeffDeputy Editor, Investing
Paul Katzeff is an award-winning journalist who has written four books about how to grow your 401(k) retirement nest egg and one about internet investing. Before becoming an investing deputy editor with Forbes Advisor, he was a senior reporter/writer at Investor's Business Daily, a correspondent for Money magazine, managing editor of the Boston Business Journal and staff writer for the Boston Herald American Sunday magazine. His work has been featured in The New York Times and The Wall Street Journal.
Deputy Editor, Investing
Reviewed
Updated: May 6, 2024, 10:21am
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Commodities are an ideal hedge against inflation, while also offering diversification. And while commodities might have pulled back in 2023, longer-term trends demonstrate why prudent portfolio allocation is so important for weathering all kinds of market conditions.
However, owning commodities directly isn’t really possible for most regular investors. That’s why commodity ETFs offer an easy way to get exposure to this asset class. Relatively low costs, high tax efficiency and superior liquidity make commodity ETFs a great addition to your portfolio. Here are eight funds that stand out to Forbes Advisor.
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Show Summary
- 8 Best Commodity ETFs of May 2024
- Methodology
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8 Best Commodity ETFs of May 2024
| ETF (ticker) | Expense ratio |
|---|---|
Energy Select Sector SPDR Fund (XLE) | 0.09% |
iShares Gold Trust (IAU) | 0.25% |
Abrdn Bloomberg All Commodity Longer Dated Strategy K-1 Free Fund (BCD) | 0.30% |
United States Oil Fund, LP (USO) | 0.60% |
Abrdn Physical Precious Metals Basket Shares ETF (GLTR) | 0.60% |
0.75% | |
Invesco DB Commodity Index Tracking Fund (DBC) | 0.85% |
Invesco DB Agriculture Fund (DBA) | 0.85% |
Energy Select Sector SPDR Fund (XLE)
Asset type
Energy
Expense ratio
0.09%
Total assets
$39.2 billion
Editor's Take
While the Energy Select SPDR Fund does not hold commodities directly, it offers investors indirect exposure to energy via an allocation to the largest oil companies.
XLE’s portfolio owns 23 holdings. They’re a sampling of stocks in the energy sector of the S&P 500 Index. They give XLE a cross section of equities in the oil, gas and consumable fuel, energy equipment and services industries. They consist of such familiar names as integrated oil and gas giants Exxon Mobil (XOM) and Chevron (CVX) as well as oilfield services provider Schlumberger (SLB) and pipelines titan Kinder Morgan.
XLE is also the largest ETF on this list with over $38 billion in total net assets, while its expense ratio is extremely low at 0.10%, thus offering an inexpensive avenue into the energy sector.
Of course, last year’s energy crisis is an acute reminder of the world’s dependency on this commodity, but investors in XLE benefitted to the tune of a 64.29% 2022 return.
Abrdn Bloomberg All Commodity Longer Dated Strategy K-1 Free ETF (BCD)
Asset type
Energy, precious metals, industrial metals, agriculture
Expense ratio
0.30%
Total assets
$208.2 million
Energy, precious metals, industrial metals, agriculture
0.30%
$208.2 million
Editor's Take
Abrdn’s Bloomberg All Commodity Longer Dated Strategy ETF tracks the total return version of the Bloomberg Commodity Index (BCOM).
BCOM aims to represent the entire commodities trading market. It consists of about two dozen different futures contracts.
In terms of industries, energy accounts for the largest allocation. Natural gas is the biggest segment of that. Other industry allocations include precious metals, agricultural products and livestock.
No single commodity may constitute less than 2% or more than 15% of the BCOM index, while no commodity sector may take up more than 33%. This allows BCD to offer investors well diversified exposure to the physical commodities market for a relatively cheap 0.3% expense ratio.
United States Oil Fund LP (USO)
Asset type
Oil
Expense ratio
0.60%
Total assets
$1.4 billion
Oil
0.60%
$1.4 billion
Editor's Take
The U.S. Oil Fund LP offers investors exposure to oil using near-term WTI futures and rolling them over on a monthly basis.
Given the concentrated nature of the fund and the volatility of oil prices, USO carries a greater risk of volatility than many other ETFs. Its total returns in 2021 and 2022 were about 64% and 29%. But in 2020 it lost about 68%.
USO is also the only ETF on this list to have not generated a positive average annual return over the last five years.
USO offers liquidity, trading 3.7 million shares daily on average over the past three months.
Invesco DB Commodity Index Tracking Fund (DBC)
Asset type
Energy, metals, agriculture
Expense ratio
0.87%
Total assets
$1.7 billion
Energy, metals, agriculture
0.87%
$1.7 billion
Editor's Take
The Invesco DB Commodity Index Tracking Fund offers exposure to a wide range of commodities across the energy, metals and agricultural sectors.
This ETF is rebalanced and reconstituted annually in November.The Fund caters to investors who want a cost-effective and convenient way to invest in commodity futures. DBC’s index holds futures contracts on 14 of the most heavily traded and important physical commodities in the world. So, DBC shareholders get exposure to such assets as gasoline, West Texas intermediate (WTI) crude oil, Brent crude, New York Harbor ultra-low sulfur diesel, gold, sugar, soybeans, copper, corn, wheat and aluminum.
In this way, DBC offers diversification and broad exposure across the commodities spectrum, and it comes with a lower risk profile than many other commodity ETFs. Yet despite its diversification, DBC’s five-year average annual return tops its Morningstar commodities broad basket peer group’s average.
Invesco DB Agriculture Fund (DBA)
Asset type
Agriculture
Expense ratio
0.93%
Total assets
$761.5 million
Agriculture
0.93%
$761.5 million
Editor's Take
Launched in 2007, Invesco’s DB Agriculture Fund is one of the older ETFs in the agriculture space. With roughly 388000 shares of average daily trading volume over the past three months, DBA offers decent liquidity in this space.
In descending order of weight, DBA currently holds futures in sugar, cocoa, live cattle, soybeans, coffee, corn, lean hogs, wheat, feeder cattle and cotton.
With an average annual return of roughly 5% over the past five years, DBA trails some of this list’s other sector ETFs. But for investors looking to allocate to agriculture without the inconvenience of buying their own futures, DBA is a good option at a reasonable fee.
*All data sourced from Morningstar Direct, current as of May 6, 2024, unless noted otherwise.
Methodology
To choose the best ETFs for this listing, we screened over 100 commodities funds for the following characteristics:
- No inverse or leveraged exposure. We omitted any funds that utilize leverage and reset daily returns, and we only considered those with long exposure to the underlying assets.
- Fund size (total net assets) of at least $500 million. We omitted any funds with less than half a billion dollars of net assets.
- Expense ratios below 1%. Only funds offering cheap exposure to investors were considered.
- Principal protection in 2022. Given last year being a perfect climate for commodities—which included high inflation and macro uncertainty—we included only funds that protected investor capital last year by minimizing any setback. We favored funds that gained ground.
- 5-year average annual return of at least 4%. The commodities/funds have generated positive yearly returns averaging at least 4% over the past five years—with one exception.
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