What Are The Best Commodity ETFs?If you are looking to invest in commodities, it would be a wise idea to consider an ETF that gives you exposure to a large number of them.

Investing in commodities is a tactic used by many investors to help hedge against inflation.  Commodities tend to be rather volatile investment, however in times of market uncertainty many people flock to commodity investments as they are often viewed as safer investments.

Another reason investors love commodity ETFs is that they add another great opportunity to diversify the portfolio, without taking on the risk of investing in individual commodities.  Investing in commodity ETFs provides lower risk due to the diversification of numerous commodities within the fund.

Top 5 Commodity ETFs

The 5 funds showcased below have performed very well so far in the first half of 2019 while also seeing a steady amount of volume.  The funds were selected based on their YTD return and volume, please be advised that other factors like fees were not factored into this article.


1. USO (United States Oil Fund)

USO, at the time of publishing, has a YTD return of 29.71% – which is very strong among commodity investments. The United States Oil Fund, issued by USCF, has a nice high volume of 26,676,816.  The fund is a commodity pool containing crude oil assets, and it has been rather popular with short term traders.


2. IAU (iShares Gold Trust)

This ETF provides exposure to gold. IAU is designed to track the spot price of gold bullion.  It holds gold bars in a vault, which allows investors to forego the hassles associated with having a secure location to store the metal.  The fund has a YTD return of  10.41% at the time of publishing, and also has strong volume currently at 16,564,365.  With an expense ratio of only 0.25%, the IAU ETF is one of the least expensive ways to invest in gold.


3. UWT (VelocityShares 3x Long Crude Oil ETN)

At the time of writing, UWT has a whopping 83.93% YTD return. This makes it the highest, YTD return currently among commodity ETFs.  Volume is still rather strong at 10,203, 929. While the returns this year have been very good, the UWT ETF does have a higher expense ratio of 1.50%.  The fees might be negligible with such a high return, but down the road it may prove to be more expensive than you prefer.


4. GLD (SPDR Gold Trust)

GLD is one of the largest ETFs in the world. The fund’s underlying assets are gold bullion stored in secure vaults… so the price of this ETF fluctuates right alongside the spot gold prices (much like IAU). So far, year to date, the fund has returned 10.38% to investors, with a volume of 7,882,214. With an expense ratio of 0.40% – the fees are a bit higher than IAU. Since both funds essentially track the same thing, many investors end up choosing IAU over GLD due to lower expenses.


5. UCO (ProShares Ultra Bloomberg Crude Oil)

The ProShares Ultra Bloomberg Crude Oil fund has delivered a very strong return YTD at the time of writing. So far the YTD returns are at 56.69%.  The fund also has relatively strong volume at 3,388,630.  This fund offers 2x daily leverage to an index of crude oil futures contracts.  Because this fund tracks futures, it does not move alongside spot oil prices like IAU or GLD. This is not a long term, buy and hold investment – it’s rather risky and should only be in the portfolio if it can be monitored daily.

If you are looking for a great way to invest in commodity ETFs, you should consider taking a look at these 5 funds mentioned above.  Below is a snapshot of current performance for the 5 commodity ETFs mentioned above.

ETF Jeff's Final Thoughts

Final Thoughts

I like to keep a fair mix of commodities within my portfolio.  This is both for diversification purposes and as a hedge against inflation.  Commodity ETFs are my favorite way to invest in commodities due to the simplicity, diversification and low costs.  I’m a fan of the 5 funds mentioned in this post, but beware that this is based specifically upon the performance of these funds between January and June of 2019.  As always, invest at your own risk.