Jared Cummans: It used to be that commodity investing was left for active traders who were savvy enough to navigate the complex futures world. But the introduction of commodity ETFs changed all that, as it was suddenly possible for retail investors to gain exposure to hard assets of all kinds with a single ticker. As the industry began to grow, investors quickly flocked to their favorites and left other funds out in the dust. In the spirit of “bigger is not always better,” we outlined three solid commodity ETFs whose size may have caused them to go unnoticed by many investors [for more commodity ETF news and analysis subscribe to ourfree newsletter].
Teucrium Corn Fund (NYSEARCA:CORN)
This fund is the only ETF that solely offers exposure to corn futures. But rather than using a front-month strategy that could easily fall prey to contango, this product invests in multiple contracts at the same time. Its roll process is not forced to buy the front month as many first generation funds are, giving it a potential leg up on the competition. The fund has gained mild popularity, trading more than 65,000 times each day with over $52 million in assets, but its expense ratio of 100 basis points may be turning some away. But there are also some very compelling demographics behind investing in corn and other grains.
E-TRACS Natural Gas Futures Contango ETN (NYSEARCA:GASZ)
For all of you U.S. Natural Gas ETF (NYSEARCA:UNG) haters out there, GASZ may just be the option for you. The fund invests in natural gas futures by going long in mid-term contracts and short on front-month futures. This allows the fund to take advantage of contangoed natural gas markets, a common occurrence. GASZ is up over 3% this year while the massive UNG has lost nearly 40%; these results alone are enough to earn GASZ a second look for your portfolio [see also 25 Ways To Invest In Natural Gas].
E-TRACS UBS Bloomberg CMCI Gold ETN (NYSEARCA:UBG)
This fund invests in gold futures, but is largely overshadowed by the SPDR Gold Trust (NYSEARCA:GLD). While UBG may be nowhere near the size of its physically-backed competitor, it offers two big advantagesthat investors may want to take a closer look at. For starters, this fund charges 10 basis points less than GLD, and it also dominates from a tax perspective. All physical gold products, like GLD, are taxed as collectibles, meaning that they will incur a short and long-term rate of 28%. UBG, being an ETN, will only charge 15% for long-term capital gains, potentially making it a better investment as far as net returns are concerned.
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