ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Building Wealth With a Commodity ETF

Updated on August 24, 2015

Commodity Bull Market

Before I get into what a commodity ETF is and how to use it to build wealth, it would be of little value unless the general performance of commodities in general is included in the conversation.

Commodities of course were were in the middle of a bull market when the economic disaster hit, which caused commodity prices to plunge. It must be understood that this has in no way stopped the bull commodity market, it has only postponed it.

So once the economic conditions change, demand for raw materials and agricultural products will resume in a big way, and the commodity bull market will continue.

The consequences of the economic downturn are a blessing in disguise for commodity investors, as it will prolong the length of the commodity bull market, giving investors even a longer timeframe to participate.

What is a commodity ETF?

Basically a commodity ETF or exchange traded fund is a tracking index of the prices of an individual commodity or grouping of commodities, such as gold or silver.

One strength of them versus traditional direct investing in futures is there are no more risks than your original capital. Leveraging to invest in futures, on the other hand, can cause you to lose more than your initial capital.

What this means is investing in a commodity ETF is a pure price play. Price is the only thing connected to profits or losses, and so is directly related to supply and demand.

Factors to Consider


A strength of commodity futures is the leverage involved, so when a commodity ETF invests in futures, there is extra capital available to reinvest in what is usually interest-bearing government bonds.

What this does is help defray costs related to doing business and an index, and have also been used to pay out dividends.


There aren't too many expenses connected to operating an index; at least in contrast to other investment vehicles, but there are other expenses to consider.

For example, there could be raw material storage costs, trading expenses and other general charges which must be included in your decision-making and understanding of what you're getting into.

On the positive side, most commodity ETFs don't trade in and out of the market as other funds may do, so that can cut down on expenses as well.

Still, all this has to be taken into consideration, as with all things being equal, expenses could be the determining factor in success and failure.

What you need to know about Commodities to Succeed

Like other investment vehicles, commodity ETFs offer a variety of types which focus on particular sectors. For example, some may only invest in gold, or others in certain agricultural products, etc.

What we need to do is keep up on the supply and demand factor of what the particular commodity ETF and its focus is on.

In the case of a basket of commodities, it's probably more useful to look at the overall economic picture. That's because nations and companies that acquire raw materials will cut back in slower times, and so that will have a direct impact on price movement.

Concerning a commodity ETF which focuses on a single commodity, it's much easier to do you homework to understand where prices will head.

Agriculture Commodities Should Do Very Well For Years

Using a Commodities Broker

While many people may feel more comfortable using a commodities broker to do their trading, it's still a good idea to at minimum have a general grasp of what the overall commodities market is doing, along with individual commodities you're interested in, or have invested in.

This empowers you to be able to ask questions intelligently in order to keep your broker on his toes, or in check, so he knows you're watching what's going on with your investment.


    0 of 8192 characters used
    Post Comment

    • profile image


      8 years ago

      Great article! Rated as useful and thumbs up. I am looking forward to investing some money into gold bullion. Even though the value of silver is growing, a gold investment is more efficient. You simply can't compare the results of a gold investment with silver.

      Read more about gold bullion at


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)