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Investing Specialists

Adding Commodities to Your Portfolio? Not So Fast

You may already be more exposed than you think.

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With growth in emerging markets continuing apace, it's easy to assume that demand for commodities such as oil, metals, and food products will march inexorably higher, too.

It's also tempting to want to position your portfolio to benefit from price gains in commodities. If you're going to have to fork over more cash to fill up your gas tank and your kitchen cupboards, why not try to earn back at least some of those extra costs by owning commodities or the companies that sell them?

A lot of investors clearly have the same idea: Mutual funds in the natural-resources category, which houses energy- and commodities-focused funds, raked in $4 billion of new assets in May 2008 alone, the second-largest haul of any fund type. And we've seen a rush of new investment options--mainly exchange-traded funds--coming to market.

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Christine Benz does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.