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.

Are equity-based commodity ETFs a good option?

These equity funds are viable alternatives to futures-backed ETFs, which may be subject to trading limits and other regulatory restrictions. Further, equity-based commodity ETFs have better tax implications than ETFs that hold physical stockpiles of precious metals.

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.