Many individual investors are starting to look outside of the U.S. stock market for opportunities to diversify their portfolios, and one market that has received an increasing amount of attention during the past few years has been the commodity market.
[VIDEO] Truly Diversify with a Commodity Index ETF
Investors like the commodity market because it is not highly correlated with the stock market—which is good for those looking for diversification in their portfolios.
However, there is a difference between diversifying part of your portfolio into a commodity or two and diversifying your portfolio across the entire commodity market.
Individual investors now have unparalleled access to the commodities market thanks to the growth and development of exchange-traded funds (ETFs). ETFs provide easy access at a relatively low cost.
Here’s the thing with commodity ETFs though. Some commodity ETFs invest in individual commodities, like gold (GLD) and oil (USO), while other commodity ETFs invest in the entire commodity market (DBC).
If you really want to be diversified in your portfolio, consider using a commodity index ETF instead of a single commodity ETF. You will experience less volatility in your portfolio, and you will have fewer funds to manage.