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, while demand for a commodity like copper may strengthen due to increasing manufacturing and construction activity. 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.

Key Takeaways

  • Commodities have underperformed the broader market in the last year.
  • The ETFs with the best 1-year trailing total return are CPER, JJC, and SIVR.
  • The first two ETFs hold copper futures contracts, and the third ETF holds silver bullion.

In total, there are 45 commodities ETFs that trade in the U.S., excluding inverse and leveraged funds, as well as those with under $50 million in assets under management (AUM). Commodities, as measured by the S&P World Commodity Index, have underperformed the broader market with a total return of 16.1% over the past 12 months compared to the S&P 500's total return of 34.4%, as of March 1, 2021. The best-performing commodities ETF for Q2 2021, based on performance over the past year, is the United States Copper Index Fund (CPER). We examine the top 3 best commodities ETFs below. All numbers below are as of March 2, 2021.

United States Copper Index Fund (CPER)

  • Performance over 1-Year: 59.8%
  • Expense Ratio: 0.76%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 174,316
  • Assets Under Management: $179.8 million
  • Inception Date: November 15, 2011
  • Issuer: USCF

CPER is structured as a commodity pool, a type of private investment that combines investor contributions to trade commodities futures and options. The ETF tracks the SummerHaven Dynamic Copper Index Total Return, which is designed to reflect the performance of the investment returns of a portfolio of copper futures contracts and copper-related futures contracts. In addition to acting as a potential hedge against inflation, copper is widely used in various industrial and construction processes. CPER, by investing in liquid futures contracts along the copper futures curve, provides investors with an opportunity to profit from increased demand for raw materials in a growing economy.

iPath Series B Bloomberg Copper Subindex Total Return ETN (JJC)

  • Performance over 1-Year: 59.7%
  • Expense Ratio: 0.45%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 17,803
  • Assets Under Management: $63.6 million
  • Inception Date: January 17, 2018
  • Issuer: Barclays Capital

JJC is structured as an exchange-traded note (ETN), a type of unsecured debt instrument that tracks an underlying index of securities and trades like a stock. ETNs share similar characteristics to bonds but they do not make periodic interest payments. JJC is designed to track the performance of the Bloomberg Copper Subindex Total Return, an index that reflects the potential returns of an unleveraged investment in copper futures contracts. The fund provides investors with a potential hedge against inflation by investing in copper futures.

Aberdeen Standard Physical Silver Shares ETF (SIVR)

  • Performance over 1-Year: 59.2%
  • Expense Ratio: 0.30%
  • Annual Dividend Yield: N/A
  • 3-Month Average Daily Volume: 1,148,895
  • Assets Under Management: $1.0 billion
  • Inception Date: July 24, 2009
  • Issuer: Aberdeen Standard Investments

SIVR is structured as a grantor trust, a type of investment trust offering a certain degree of tax protection. The ETF is designed to track the performance of the price of silver, less the fund's expenses. Physically backed by silver bullion held in a vault located in London, the fund provides investors a cost effective and convenient way to invest in a major precious metal. The fund is best utilized as a safe haven during times of market uncertainty rather than as part of a long term buy-and-hold strategy.

The comments, opinions and analyses expressed herein are for informational purposes only and should not be considered individual investment advice or recommendations to invest in any security or to adopt any investment strategy. While we believe the information provided herein is reliable, we do not warrant its accuracy or completeness. The views and strategies described on our content may not be suitable for all investors. Because market and economic conditions are subject to rapid change, all comments, opinions, and analyses contained within our content are rendered as of the date of the posting and may change without notice. The material is not intended as a complete analysis of every material fact regarding any country, region, market, industry, investment, or strategy.