Best Commodities ETFs for Q1 2021

Investing

Many investors are hesitant to buy individual commodities, but exchange-traded funds (ETFs) make this area accessible to a broader range of investors. Commodities can be a useful hedge against inflation, and they help diversify investment portfolios beyond more traditional stocks and bonds. Commodities such as silver and palladium also are seen as safe havens in times of market uncertainty. Thus, these ETFs offer a vehicle to gain exposure to one or more commodities while reducing the risk inherent in investing directly in a single one. Commodities, as represented by the S&P World Commodity Index, have dramatically underperformed the broader market over the last year. The Index has a 1-year trailing total return of -24.1% compared with 18.1% for the S&P 500, as of November 13. 

Key Takeaways

  • Commodities have significantly underperformed the broader market in the last year.
  • The ETFs with the best 1-year trailing total returns are SIVR, SLV, and PALL.
  • The top holdings for these funds are silver bullion, silver bullion, and palladium bullion, respectively.

In total, there are 37 commodities ETFs that trade in the U.S., not including inverse and leveraged funds as well as those with under $50 million in assets under management (AUM). The best commodities fund, based on a 1-year trailing total return, is the Aberdeen Standard Physical Silver Shares ETF (SIVR). Below, we’ll take a closer look at the top 3 commodities ETFs measured by 1-year total returns. All data aside from performance figures above are as of November 16.

  • 1-Year Trailing Total Return: 44.5%
  • Expense Ratio: 0.30%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 961,021
  • Assets Under Management: $789.8 million
  • Inception Date: July 24, 2009
  • Issuer: Aberdeen Standard Investments

Like many silver ETFs, SIVR is structured as a grantor trust, giving investors a right to a particular quantity of silver. SIVR utilizes a physically-backed strategy rather than one based on futures contracts. By using this physically-backed strategy, this fund is able to eliminate issues that arise when owning futures contracts, such as contango and backwardation. The ETF also provides investors with a more realistic pricing of the metal it owns as a result of this strategy. The sole holding of this fund is silver bullion.

  • 1-Year Trailing Total Return: 44.0%
  • Expense Ratio: 0.50%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 38,095,288
  • Assets Under Management: $13.8 billion
  • Inception Date: April 28, 2006
  • Issuer: iShares

Like SIVR, SLV is a grantor trust holding silver bullion. This fund is nearly identical to SIVR, except that it charges a slightly higher expense ratio. The sole holding of SLV is silver bullion.

  • 1-Year Trailing Total Return: 33.9%
  • Expense Ratio: 0.60%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 31,471
  • Assets Under Management: $369.9 million
  • Inception Date: January 6, 2010
  • Issuer: Aberdeen Standard Investments

PALL is a grantor trust providing investors access to palladium bullion. Given that there are no pure palladium miners, PALL is one of the only ways that investors can gain access to the metal aside from futures contracts. The sole holding of PALL is palladium bullion, and the fund aims to track the spot price of the commodity. While PALL is an efficient way to buy large quantities of the precious metal, palladium’s price can swing sharply because it is often closely tied to the cyclical global car industry.

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