Even the most focused investors know that the best way to defend their portfolio against risk is to diversify their assets.This is even more true for commodity ETF investors, where too often funds claim to be diversified but still have upwards of 70% of their total assets allocated to a specific commodity. Oil and gas are the mostprevalentoffenders of this rule, both of which can be extremely volatile and should only be invested in by those who have the ability to frequently monitor their positions and have a full understanding of the two commodities. Investors who are looking for more balanced exposure should always take the time to take a close look at an ETF's holdings to see just how diversified the fund really is.

To avoid investing in funds with heavy tilts towards big oil, we have outlined 3 ETFs that have relatively well-balanced exposure to thecommoditiesmarket:

DJ-UBS Commodity Index 2-4-6 Blended Futures ETN (BLND)

This ETN tracks an index that is designed to provide diversified exposure across multiple commodity futures maturities.Only a third of the index is made up of energy futures, while the remainder is allocated to industrial metals, grains, and precious metals, which still allows space for some minor holdings in soft commodities and livestock. The structure of this fund is an equally weighted basket of 2, 4, and 6 month forward contracts on each of the sectors above, creating an ever-cycling selection of contracts. As a relatively new ETN it is hard to know how this fund will preform over time, but with the lowest expense ratio of these diversified funds (0.70%) as well as the best 13 week return (11.1%), this fund is certainly worth a closer look .

Dow Jones-UBS Commodity Index TR ETN (DJP)

DJP is another popular option for commodity investors, as this fund tracks an index that is designed to measure the performance of a diversified basket of futures contracts on roughly 20 different physical commodities. Since the ETN also tracks a Dow-Jones UBS modified index, it is perhaps not surprising to find that the weightings of this ETN are similar to BLND, with about 30% of the fund invested in energy contracts. DJP does, however, have a slightly larger portion of its portfolio dedicated to agriculture futures. The remainder of the portfolio is divided among industrial metals, precious metals, and livestock. This 6 year old fund has the highest YTD return (3.6%), and investors who have held it for 3 years have enjoyed a 13.5% return. Like all futures-based commodity products however, DJP can fall victim to contango, but its overall performance speaks loudly for how lucrative of an investment it can be.

Continuous Commodity Index Fund (GCC)

Unlike other total commodity ETPs availableto investors, this fund does not have a clear bias towards energy, but instead is evenly divided between agriculture, metals, energy, and soft commodities. This truly diversified ETF follows the Reuters Equal Weight Continuous Commodity Total Returns Index, which holds roughly 17 commodities that are averaged across the futures curve 6 months out. This broad exposure comes at a relatively steep price tag however, with GCC having the highest expense ratio of the bunch at 0.85%. While GCC may be more expensive, the well-balanced exposure it offers may be well worth it for those seeking non-biased access to commodities .

Disclosure: No positions at time of writing.

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