Commodities, and commodities ETFs, are finally having their day in the sun.
But it’s a different one every week these days that takes off out of nowhere. How do we know which ones to invest in?
We usually don’t. So why not use broad commodities ETFs, and just invest in all of them?
I did a podcast episode on this. You can listen to it here, or continue reading on.
Hate To Say I Told You So
It was not a hard prediction to make, though somehow it was an unpopular one. Commodities will have their time in the sun once again, and it likely won’t happen until the Green Utopia narrative gets exposed, and the “Oh Shit” narrative becomes more of a reality.
And all we had to do was get rid of harmful fossil fuels.
Shortages, logistics issues, inflation — none of which appear to be going away anytime soon.
We, dear reader, are in the early throes of the “Oh Shit” narrative.
This is bad for the world. Potentially really bad. But we can do nothing about this.
Drive your electric cars, recycle your plastic bottles Western World. It’s not going to matter. It’s too late.
The world will need to go backwards, at a very uncomfortable clip, before we can finally move forwards again.
One of the top energy experts in the world, Steve St. Angelo from the SBR Rocco report gave a phenomenal breakdown of this in the podcast episode below.
He has a good free newsletter as well, I do recommend.
While I do not share Steve’s sentiment on Bitcoin, and any talk about asteroid mining makes me shake my head, but I will not even attempt to challenge on him on much else. He is a major insider and authority in this space, and is rarely wrong from a predictive standpoint.
Out Of The Darkness
As I always say, and said often during the early stages of the pandemic in 2020, it doesn’t have to be all bad.
Don’t get me wrong, it will be bad — for the poor especially. Just like it always seems to go.
The one thing we can do is get ourselves as far away from that particular income bracket as humanly possible. The further we are, the safer we will be.
And if we already know these things are damn near inevitable, why not make good money from it, further vaulting us into safer financial territory?
You can. And broad commodities ETFs are a great place to either start, or add to your portfolio for more exposure and more downside protection.
I’m not kidding, higher income brackets will be generally spared if things get out-of-control bad. The rest of you will not be. Inaction is not the move here.
Overview
Below are the broad commodities ETF we will be covering in this blog post. There are lots of them, so I had to use some criteria to narrow them down. They are:
- Over $100m AUM
- No K-1 (will explain)
- I could get a hold of them on the phone (so no BlackRock)
- Nothing overly creative
Simple is good here. We’re already dealing with instruments which are quite complex at their core, we don’t need to get fancy for no good reason.
A K-1 is a tax document in the US, and it does not make your taxes go up, but if you have a CPA do your taxes for you, they will likely charge a couple hundred just to file it. We don’t need that, especially not for one investment.
The higher the AUM, the better liquidity in most cases, and you will likely never run into a roach motel situation where you can easily buy, but have a really hard time selling when it’s time to.
These are only a few. There are many. Do your own research. Read my disclaimer if you need to.
* If you dig deeper, you will also see how they invest in a lot of cash or T-Bills, or some equivalent. This is simply the collateral they need to put up in order to bring this type of product to the masses.
Let’s get into it.
PDBC
Let’s start with the big boy. Invesco’s offering is the largest in AUM (by far), and this will always attract people who love liquidity. Liquidity is important. Most of these instruments are easy to buy, but the lower the liquidity, the harder it may be to sell when it’s time to.
So what are they doing, and what are you getting? You will typically get a basket of anywhere from 14 to 27 commodities. PDBC has 14. You can find a decent lineup of what you’re getting here.
You will notice two things on that link I just provided. One, this is very oil heavy. You have to be okay with that if you wanna ride this train. Two, the information provided is from ticker symbol DBC, not PDBC. Invesco also owns DBC, and the only difference is DBC has a K-1 tax event, and PDBC doesn’t.
This being said, the AUM from PDBC absolutely dwarfs DBC. That K-1 thing is pretty important to most people.
But I gave you the DBC info because it’s easier to decipher. Just trust me on this. Again, unless you want me to spend the next 8 paragraphs talking about collateral.
PDBC Expense Ratio: .59%
YTD return: +48.03%
FTGC
From First Trust Global, we have an offering very different from PDBC. Everything from first trust is actively managed, meaning they get in there and move things around as they see fit. What you see right now will likely change (though not TOO much) a week later. They are transparent, so you can see what they are doing at any time.
For right now, you can see their holdings here. They are far more metals-heavy at the time of post than they are in energy. Again, we all have a preference. Find yours.
FTGC Expense Ratio: .95%
YTD Performance: +32.13%
COMB
This is one of the ETFs you will hear people on Bloomberg and CNBC reference a lot.
GraniteShares’ offering, COMB does its best to track the Bloomberg Commodities Index, but also attempts to be a bit more equal-weighted across the board, so I’m glad I am able to bring this offering to you on the blog as well.
They aim to diversify 1/3 each into energy, metals, and agriculture. You can see their holdings by clicking the link here, scrolling down, and hitting the “Portfolio” tab.
You’re getting 23 commodities with this one.
COMB Expense Ratio: .25%
YTD Performance: +33.25
Again, these are only a few of many. I didn’t even have the change to dig into the offering you may find on the Aussie and UK exchanges, but hopefully this will give you a bit of a guideline in your search.
Conclusion
You can see how much these things vary, so do not get lazy here.
We could very well be in the early stages of a commodities super-cycle. This usually means life will suck in the process, but at least you can watch your account go up as Rome burns to the ground.
— VP