If you’ve been a long-time listener to my radio show, or even if you’ve just started tuning in, you’ve probably already heard me singing the praises of exchange traded funds.
I absolutely love ETFs for a multitude of reasons, not the least of which are low fees, objective management, ease of trade and no restrictive holding periods like the ones imposed on you by traditional mutual funds. Now, however, I have a few more reasons to love ETFs.
On Monday the first ETF that allows you to invest money directly in the price of crude oil debuted on the American Stock Exchange. It is the United States Oil Fund, ticker symbol USO.
USO is designed to provide exposure to the total return movement of light, sweet crude futures contracts traded in the U.S., and will provide access to crude oil without requiring individuals to trade on the futures market. In its first day public, USO traded over 3.8 million shares.
This latest commodity ETF is part of a larger industry trend toward providing ETFs of all stripes and for nearly every investment taste. The first commodity ETF was StreetTracks Gold Trust (GLD), which began trading in late 2004. So far in 2006, GLD is up over 15%.
The iShares Comex Gold (IAU) followed shortly afterward. It too is up over 15% on the year. The success of both gold ETFs has investors eagerly awaiting the launch of the first silver ETF. That ETF is due to come out soon, as it just has to pass a few more regulatory hurdles.
Maybe the best illustration of the move toward commodities ETFs is January’s debut of the Deutsche Bank Commodity Index Tracking Fund (DBC). This ETF’s investment goal is to mirror the performance of a diverse basket of commodities. This ETF has gained nearly 6% over the past four weeks.
Right now the commodities bull is in stampede mode, with oil and gold hitting historical highs. If you’ve been looking for ways to profit from this trend, you need to check out these commodity ETFs.