Commodities investments are sometimes dangerous due to the volatility of the underlying uncooked supplies that derivatives contracts are based mostly on or that drive revenues of producers. Demand for uncooked supplies ebbs and flows with financial cycles, and commodities usually carry out effectively at first of growth cycles however then carry out poorly in instances of slowing financial progress or recession.
To assist counter this, buyers can flip to commodities exchange-traded funds, or ETFs, to achieve single-ticker diversification amongst sorts of commodities or holdings of a number of manufacturing corporations to reduce threat.
A few of these ETFs are mainly wrappers for many completely different futures contracts. Shorter-dated contracts have a greater probability of monitoring the underlying commodities.
submitted by /u/MattWhittaker