Investors worried about sticky inflation should take a closer look at commodity ETFs as hedges against rising prices.
Why?
History shows that commodities have proven resilient amid persistently rising prices. From energy sources to agricultural products to metals, commodities of many different flavors have naturally seen their values rise amid inflationary pressures.
Inflation is cooling, but still remains high
The U.S. inflation rate ran at an 8.0% clip in 2022 and at 4.1% in 2023. And while inflation has edged down to “only” 3.3% as the U.S. Bureau of Labor Statistics reported in May CPI report, commodity prices remain elevated
“We can safely say that we are past peak inflation, but it is too early to call victory against inflation,” says Gargi Chaudhuri, head of iShares Investment Strategy, Americas at BlackRock. “Investors should continue to think about hedging against inflation and consider how higher interest rates for longer could affect their portfolios.”
Why should you invest in commodity ETFs?
One way to hedge against rising prices is to hold a position in commodity ETFs that own a basket of key materials used in the global economy. After all, energy products, metals and agriculture often see their values rise amid inflationary pressures, because such sectors are the first link in the supply chain for many goods.
Still, the idea of engaging directly with commodity markets can be intimidating for investors. Many online brokers require a separate account or at least separate controls to trade futures, and even if you get over that hurdle, there’s always the question of what to buy and sell – and when.
The five commodity ETFs featured here can take some of the guesswork out the equation. To compile this list of the best ETFs focused on this diverse asset class, we looked for funds that are benchmarked to physical commodity markets, have more than $1 billion in assets under management, and provide a simple one-stop way to invest in your normal brokerage account.
