Using ETFs To Successfully Trade Commodities
The Dynamic Wealth Report
May 13, 2009
We're In The Triple Digits Now!
It finally happened this week. It happens every year… you can’t quite
set your watch to it, but it’s a constant here in the desert. What am I
talking about? Triple digit temperatures of course.
Yesterday it was 105 degrees here in Phoenix.
If you’ve never been in the desert, remember, it’s a dry heat.
Most people dread the heat, but I happen to enjoy it. After all, I live
in an air-conditioned house, work in an air-conditioned office, and
drive an air-conditioned BMW. The heat is easy to deal with… if you do
like I do and deal with it on your terms.
The same is true in trading stocks.
Back in the 1970s, few people actively traded in the stock market. You
were forced to use expensive brokers. The cost of trading was
ridiculously high. Information was difficult, if not impossible, to come
by. And the markets were held up as a mystical place.
Not anymore.
You can trade on your own terms these days. Discount brokers have cheap
rates. You can find everything you ever wanted to know about a company
on the Web (I hope the The Dynamic Wealth Report is a key resource). And, the once mystical is now mundane.
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Everyone seems to have an online trading account. And buying shares of
AT&T (T) or IBM (IBM) is easy as pie.
Trading in the markets is getting better every day.
One of the most exciting developments is the creation of ETFs (exchange
traded funds). They’ve opened doors previously shut to the investing
public. Now trading strategies only available to professional investors
are available to you and me.
Let me give you an example.
Often times, professional investors use part of their funds to mirror a
specific index. Doing it in your personal account was next to
impossible. Now, trying to mirror a specific index – like the S&P 500,
Dow, or NASDAQ - is very easy to do. In all of 30 seconds, you can buy a
share of an ETF tracking any of these indexes and a hundred more.
I started using ETFs more than a decade ago. As their popularity has
grown, so have the number of new strategies and styles they seek to
mirror.
Take commodities for example.
Just two years ago, you’d need a huge portfolio to justify trading
commodities. Your only choices were investing in the futures
market directly, which is risky, or you could buy a commodity mutual fund with
high fees and suspect performance.
In the last 24 months, that’s all changed.
New commodity focused ETFs and ETNs are coming out every day. Some of
these are focused on tracking a basket of commodities. Others are
focused on specific commodity complexes like Energy or Grains. Still,
more are focused on individual commodities.
Commodity ETFs are everywhere.
If you want to trade the entire commodity market, check out the PowerShares DB Commodity Long ETN (DPU). It’s set up to mirror the
movement in crude oil, heating oil, corn, wheat, gold and aluminum. PowerShares also offers an inverse fund. That one goes up in value as
commodities fall in value.
If you want to focus on just an individual commodity, check out the
iShares COMEX Gold Trust (IAU). It holds several billion in physical
gold. When you buy the ETF, you get a piece of that stock pile. It’s a
great way to easily get exposure to gold. Something we all need as
runaway government spending will spark inflation.
Like I said, these aren’t the only ones out there. If I tried to list
them all here, it would go on for pages. Just remember the flexibility
ETFs offer is great for diversifying your portfolio.
And it’s great news for us. Think about it… commodities as an asset
class were incredibly difficult to access. Now in 30 seconds and for the
cost of a regular stock trade, you can quickly add commodities to your
portfolio.
***Editor’s note: We’re putting the final touches on a new service that
focuses solely on commodities. It’s a great system for generating
substantial profits without the usual risk (or high minimums) associated
with trading futures. We’ll offer charter memberships to all of you
first before we release it to the general public. Look for more
information in your email inbox sometime in the next 4-5 days…
• Gold ($927 per oz.)
Gold prices ran up to $1,000 an oz. just a few months back. Then the
precious metal retreated during the latest market rally, trading under
$875 for a while. Now, it looks like equity markets are weakening… and
gold is staging another rally. Long term, I think almost everyone should
have some gold in their portfolio.
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