In my opinion, among the safest investments today are in the commodity markets.But, that is assuming you buy when commodities are trading at depressed levels. Food commodities are a good investment because there will always be a demand and all world data indicates supply is suppose to decrease.
The most common question about resource commodities is which ones are best? There are three different kinds, oil, natural gas, and electricity. Where to find energy commodities is the next most common question. This is not a problem once you locate a good energy ETF list. The next thing to do is predict which resource commodity will see the most growth, or which has the best demand/supply problem.
Just like a professional stockbroker will deploy a variety of methods to determine which stocks are going to be the best investment, doing the proper research such as analyze the company’s structure, the management, the standard operating procedures, and the company’s credit, the same type of research needs to be applied when analyzing energy ETFs and the different factors that could impact its price.
For example, as unusual as it may sound, religion can be one of the subtle trends. For instance, in the Middle East there is a lot of tension between Sunni and Shiite Muslims. Should that tension erupted into a war disrupting the flow oil there could be a dramatic rise in oil prices. This would also raise the value of oil ETF’s. Another subtle indicator is government leaders. Prior to the current regime in Venezuela, there was never a concern about the flow of oil from there. But once the Venezuelan government decided to nationalize foreign companies, investors figured the supply of oil could be affected as historically, state run oil companies are not as efficient as publicly run oil companies.
Below is a simple Energy ETF list to get you started in the right direction. There are plenty of energy ETFs out there, but each individual is bearish on certain commodities.
Energy ETF List
PowerShares Global Wind Energy Portfolio (PWND)
Is an exchange-traded fund (ETF) based on the NASDAQ OMX Clean Edge Global Wind Energy Index (the Index). The Index is designed to measure the performance of global companies engaged in the wind energy industry, which are primarily manufacturers, developers, distributors, installers and users of energy derived from wind sources.
PowerShares DB Energy Fund (DBE)
Is based on the Deutsche Bank Liquid Commodity Index – Optimum Yield Energy Excess Return (the Index). The Index is a rules-based index composed of futures contracts on some of the most heavily traded energy commodities in the world-light sweet crude oil (WTI), heating oil, brent crude oil, reformulated blendstock for oxygenate blending (RBOB) gasoline and natural gas. The Index is intended to reflect the performance of the energy sector.
United States Natural Gas Fund, LP (UNG)
Company is a commodity pool that issues limited partnership interests (units) traded on the NYSE Arca, Inc. (the NYSE Arca). The investment objective of USNG is for the changes in percentage terms of its units’ net asset value (NAV) to reflect the changes in percentage terms of the spot price of natural gas delivered at the Henry Hub, Louisiana as measured by the changes in the Futures Contract on natural gas traded on the New York Mercantile Exchange (NYMEX) that is the near month contract to expire, except when the near month contract is within two weeks of expiration, in which case the futures contract will be the next month contract to expire.
SPDR S&P Oil & Gas Exploration & Production ETF (XOP)
Is an open-end investment management company. The Fund seeks to replicate as closely as possible, the performance of an index derived from the oil and gas exploration and production segment of a United States total market composite index. The Index represents the oil and gas exploration and production sub-industry portion of the S&P Total Stock Market Index (S&P TMI). The Fund generally invests all, but at least 95%, of its total assets in the securities comprising the Index.
ProShares UltraShort Oil & Gas (DUG)
seeks daily investment results that correspond to twice the inverse daily performance of the Dow Jones U.S. Oil & Gas Index. The Dow Jones U.S. Oil & Gas Index measures the performance of the oil and gas industry of the United States equity market. Component companies include oil drilling equipment and services, oil companies (major and secondary), pipelines, liquid, solid or gaseous fossil fuel producers and service companies.
Seeks daily investment results that correspond to twice the inverse daily performance of the Dow Jones U.S. Oil & Gas Index. The Dow Jones U.S. Oil & Gas Index measures the performance of the oil and gas industry of the United States equity market. Component companies include oil drilling equipment and services, oil companies (major and secondary), pipelines, liquid, solid or gaseous fossil fuel producers and service companies.
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November 11, 2010
Commodity ETFs