Should you buy a commodity ETF?
Understand your investment goals and time horizon
The first question to ask yourself is this: Do you already have an ETF, and if so, do you need or want to invest in a commodity ETF instead of others? Most individuals choose to have ETFs that are linked to market indexes like the S&P 500. Are you looking to hedge against inflation, enhance diversification, or capitalize on commodity price movements? For instance, an investor anticipating higher oil prices might consider an oil ETF like USO.
Choose the right type of commodity ETF
Commodity ETFs come in various shapes and sizes. Some are actively managed, and some are passively managed. Some hold physical assets like gold or silver, while others focus on futures contracts or commodity-linked equities. Research the fund's structure to ensure it matches your investment strategy and preferences. For example, you might want exposure to more agricultural-related products as you see oil as eventually phasing out.