Be Cautious With Commodity Exchange-Traded Products
Before speculating with futures-based ETPs, take a moment to look under the hood.
Academic research suggests that commodities can play a role in a balanced asset allocation. A track record of providing uncorrelated returns has won the commodities Morningstar Category a place in many portfolios as an attractive diversifier in a mix of stocks, bonds, and cash.
Exchange-traded funds have made a category that was once the realm of large institutional investors accessible to the masses. But, as with everything, investors should be aware of what they are actually buying when they go shopping for a commodity-focused exchange-traded product. A look behind these funds' labels will show that they are often not what they seem.
John Gabriel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.