Commodity ETFs now exist in a range of products, from precious metals and oil and natural gas to agricultural products such as soybeans or livestock. Commodity ETFs can be created in a variety of ways, which may differently affect the investor's risk, profitability, and tax situation. A commodity ETF is an exchange-traded fund that invests in physical commodities such as agricultural products, energy sources and metals. Commodity ETFs tend to gain popularity when there is a global conflict or high inflation, as consumers always need commodities.
Luxury items, on the other hand, can be thrown away during difficult times. Instead, they invest in commodity futures and, as the name suggests, these are contracts that eventually expire at a fixed time in the future. When a futures contract approaches its delivery date, the holder will normally cancel that contract in exchange for another contract on the same commodity that will be delivered later in the future. When it comes to investing in commodities, ETFs are the best option for regular investors, as it's best to let professionals deal with the commodities listed on the futures market.
Gold is one of the most popular commodity investments in existence, since the precious metal is considered to be a store of value that will remain strong in a difficult environment and, historically, has not been correlated with the stock market.