Types of ETFs (Part 3)

Commodity ETFs

Commodity ETFs offer investors to invest in commodity, which offer as an alternative to buying physical commodity or futures contract. Inverse commodity ETFs are also available, which allow investors to make profit when the prices of commodity fall, as well as leverage commodity ETFs which allow investor to double the return.

Below are some of the commodity ETFs:

Ticker Symbol Commodity ETF
GLD Gold Trust
USO Crude Oil
UCO Crude Oil (2x)
SLV Silver Trust
BOIL Natural Gas (2x)
SCO Short Crude Oil (-2x)
KOLD Short Natural Gas (-2x)
GLL Short Gold (-2x)
ZSL Short Silver (-2x)

More information can be found from:

https://www.spdrs.com

http://www.proshares.com/

http://www.ishares.com

How Do You Evaluate ETF?

The best way to protect investors in investing ETF is to read the prospectus, and understand the strategies, costs, risks and investment goals. The ETF prospectus can be obtained from the website of the company that manage and issue the commodity ETFs, else, get it from the broker.

Risk of ETF?

It is possible that the fund manager committed mistakes and result in tracking the movement of the underlying assets. This is known as tracking error which causes the investor to suffer unrealised losses if he/she chooses to buy or sell during the period of tracking error. This is even more likely with leverage and inverse ETFs, since it requires more complex skills for the fund manager to perform the tracking.

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