7 Best-Performing Commodity ETFs for November 2024: FGDL, USG and More

What is a commodity ETF?

A commodity ETF is an exchange-traded fund that invests in physical commodities such as agricultural products, energy sources and metals. Commodity ETFs often grow in popularity during global conflict or high inflation, as commodities are always needed by consumers. Other purchases — for example, luxury goods or discretionary items — may be put off during difficult times.

Broad commodity ETFs may include several types of commodities, such as oil, wheat, gold, silver, corn, and soybeans. A more focused commodity ETF will likely invest in just one type.

7 best-performing commodity ETFs

Below are seven of the best-performing ETFs listed on major U.S. exchanges that track commodities, ordered by one-year return.

Source: Finviz. Data is current as of market close Nov. 1, 2024, and is intended for informational purposes only, not for trading purposes.

What are exchange-traded commodities (ETCs?)

Exchange-traded commodities (ETCs), which are also sometimes known as commodity exchange-traded products (ETPs), are securities that track a specific commodity, such as silver, by investing in futures contracts.

ETC returns largely reflect changes in the spot price of the underlying commodity, but other factors may cause their returns to diverge slightly from the underlying commodity. For example, the process of "rolling over" futures contracts — that is, renewing the ETC's commodity investment positions when old contracts expire — can generate unexpected profits or losses for ETCs.

Best-performing exchange-traded commodities

Below are seven of the best-performing ETCs listed on major U.S. exchanges, ranked by one-year return.

Source: Finviz. Data is current as of market close Nov. 1, 2024, and is intended for informational purposes only.

Why invest in commodity ETFs?

Commodity ETFs can help round out an investment portfolio. They offer diversification by providing exposure to additional economic sectors. That way, if one sector is performing poorly, another sector may be able to boost it.

For example, if you invest in an oil commodity ETF and a clean energy ETF, you're protecting your portfolio against economic volatility. If a foreign war is making oil more expensive, clean energy may get a boost. If the price of solar panels goes up, oil becomes more attractive to consumers. This formula doesn't always work perfectly, but it may help your investments enjoy some stability.

» Looking for more diversification? Check out the best-performing ETFs

Pros and cons of commodity ETFs

Commodity ETF pros

• Commodities can help hedge against inflation.

• Commodity ETFs may help diversify your portfolio, depending on what you’ve already invested in.

Commodity ETF cons

• Commodities are often at the whim of geopolitical and climate events. If you invest in a wheat ETF and there's widespread drought, for instance, your ETF may not perform well.

• If you invest too much in any one particular commodity, that may cancel out its diversification benefits.

How to invest in commodity ETFs

Investing in commodity ETFs is fairly easy, but you'll need to follow a few steps first if you don't already have a brokerage account.

1. Open an investment account

An investment account is simply where your investments themselves — and the money you plan to spend on them — live. Some investment accounts have significant tax benefits over others, so it's worth reading up on which type of investment account is right for you. Once you know which type of account you'd like to open, you can read our roundup of the best online brokerage accounts to find one that fits your needs.

» Check out the best brokerage accounts for ETFs

2. Research commodity ETFs

Most online brokerage accounts will have screening tools that can help you search through commodity ETFs. When comparing ETFs, make sure you look at the following metrics to help narrow down your options:

Expense ratios: Expense ratios are annual fees that are taken as a percentage of your assets. For example, if the fund charges a 1% expense ratio, and you have $10,000 invested, you'll pay $100 in fees annually. ETFs tend to have lower expense ratios than actively managed funds, and you may be able to find commodity ETFs with expense ratios around 0.20%.

Keep in mind that you'll never see expense ratios show up on monthly statements. These fees are taken out automatically, so it's important to know how much you'll lose to fees before you invest. Check out our mutual fund fee calculator to see how much a fee can cost you over time.

Volume: This shows how many shares traded hands over a given time period — it’s an indicator of how popular a particular fund is.

Holdings: Most funds will show you their top ten holdings, which means the ten companies that take up the biggest percentage of a fund.

Performance: Sure, past performance doesn’t indicate future returns, but a fund's history can be useful. Look at a fund's long-term performance, so three-year, five-year or 10-year performance instead of one-year for example, to get a sense of how it has performed historically.

3. Purchase the commodity ETF

The process for buying commodity ETFs is similar to the process for buying stocks. Navigate to the “trading” section of your brokerage’s website and search for the ETF using its name or ticker symbol and enter either how many shares you'd like to purchase or the dollar amount you'd like to purchase.