What is a commodity ETF?

A commodity ETF tracks the prices of a commodity or that commodity's corresponding index. Popular types of commodities include precious metals, such as gold and silver, and oil and gas. An investor that purchases a commodity ETF usually does not own a physical asset, but instead owns a set of contracts backed by the commodity.

What are physical backed commodity ETFs?

Physically backed commodity ETFs: directly hold commodities stored in a physical location. Typical examples include commodities, gold, silver or platinum, which can be stored for a long period of time, but not for commodities like corn, which cannot be stored for long periods of time.

Are commodity ETNs a good investment?

Owners of an ETN such as iPath Bloomberg Commodity Index ETN () will get the return of the index, minus the management fees. Commodity ETNs also offer a more favorable tax treatment over commodity ETFs. Investors who hold a commodity ETN for more than one year only pay a 20% capital gains tax when they sell a product.

Are futures-based commodity ETFs risky?

An additional risk that futures-based commodity ETFs face is that instead of simply tracking commodity prices, ETFs may influence futures prices themselves due to their need to buy or sell large numbers of futures contracts at predictable times, known as a roll schedule.