Commodity ETFs burst onto the scene a few years ago, as these products democratized an asset class that was once difficult to reach for many retail investors. Now, these products are among the most traded in the ETF space and are often coveted for the volatility and potential returns that they provide. This year saw no shortage of big movements in the commodity ETF world, as these products jumped across the board. Below, we outline the best and worst commodity funds on the year to give you a better idea of which segments outperformed, and which ones lagged behind .


The Best: Metals and Agriculture Dominate

This year is making a run at the warmest year in U.S. history, and the bone-dry drought that struck much of the nation this summer led to agricultural commodities surging and holding onto strong gains for the remainder of the year. A number of metal ETFs were among the best performers as well given the economic improvement this year.

  1. Dow Jones-UBS Tin Total Return Sub-Index ETN (JJT):Though the tin ETN has just over $6 million in assets, its 2012 performance speaks for itself as the fund has jumped a healthy 22.5% on the year. With global economies picking up this year, the demand and use for this commodity has risen, allowing JJT to profit .
  2. United States Gasoline Fund (UGA):The year's top energy performer was thegasoline ETF, which maintains exposure to front-month RBOB gasoline futures. Despite crude oil's woes for 2012, this ETF jumped over 19.9% on the year. Note that despite gas prices tumbling, UGA has had a strong December.
  3. Pure Beta Grains ETN (WEET):WEET tracks an index that is comprised of a basket of grains futures in an attempt to mitigate the impact of contango. The strategy has worked beautifully this year, as WEET comes in as a top performer, jumping just over 18% for the year.

The Worst: Softs Take a Hit

While ag as a whole had a good year, the softs sector had a number of the worst-performing products as these four volatile commodities lived up to their reputation for the year.

  1. TheDow Jones-UBS Coffee ETN (JO):A chart of JO reveals a downhill slope that began in early 2011 and has yet to let up. The ETN has lost more than 43% this year and is showing no signs of turning things around soon. If you are looking to find a beaten-down fund for the coming year, JO will certainly be a candidate, but it is impossible to predict when the fund will return to prosperity .
  2. United States Natural Gas Fund (UNG):No surprise here. UNG has not only been one of the worst performing commodity ETFs of all time, but is one of of theworst performing ETFs period. The fund shaved off another 24% this year as warm weather kept pressure on NG prices. Despite the fund's woes, it continues to maintain more than $1.2 billion in assets and trades more than eight million shares each day.
  3. Dow Jones-UBS Softs Total Return Sub-Index ETN (JJS): Not surprisingly, this broad softs ETN took a hit. Sugar and coffee both turned in tough years, dragging down a fund that only has three holdings to begin with. JJS lost just under 24% in 2012.

Follow me on Twitter @JaredCummans

Disclosure: No positions at time of writing.

Related Articles
  1. Stock Analysis

    Starbucks: Profiting One Cup at a Time (SBUX)

    Starbucks is everywhere. But is it a worthwhile business? Ask the shareholders who've made it one of the world's most successful companies.
  2. Stock Analysis

    How Medtronic Makes Money (MDT)

    Here's the story of an American medical device firm that covers almost every segment in medicine and recently moved to Ireland to pay less in taxes.
  3. Investing News

    Latest Labor Numbers: Good News for the Market?

    Some economic numbers are indicating that the labor market is outperforming the stock market. Should investors be bullish?
  4. Budgeting

    Just the Right Book Review: Is It Worth It?

    Take an in-depth look at Just the Right Book, a subscription service that delivers personalized book selections based on your reading history and preferences.
  5. Investing News

    Stocks with Big Dividend Yields: 'It's a Trap!'

    Should you seek high yielding-dividend stocks in the current investment environment?
  6. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
  7. Products and Investments

    Cash vs. Stocks: How to Decide Which is Best

    Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost?
  8. Investing News

    Who Does Cheap Oil Benefit? See This Stock (DG)

    Cheap oil won't benefit most companies, but this retailer might buck that trend.
  9. Economics

    Can the Market Predict a Recession?

    Is a bear market an indication that a recession is on the horizon?
  10. Budgeting

    The Honest Company Bundles Review: Are They Worth It?

    Learn more about The Honest Company and its bundle subscription services, which deliver discounted diapers, formula and other baby products to your doorstep.
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center