8 ½ Ways to Invest in Commodities

Have you ever heard of the saying, “don’t put all your eggs in one basket?” Well, any savvy investor knows this saying goes for maximizing your investment goals. Commodities, which are often overlooked, can make attractive trades when diversifying your portfolio. Don’t know where to begin? No worries, here’s eight and a half ways you can start investing in commodities!

The Passive Approach:

Buy the Index: Google commodity Index. There is no shortage of commodity ETFs to choose from, and most commodity ETFs hold futures contracts for exposure rather than the actual commodity itself. Buyer beware that holding futures exposes investors to potential “rolling risk” when commodity futures curves are in contango, where the ETF must pay to roll from the expiring front-month contract and into the next most actively traded month.

Buy the Active Index

If you’re someone who prefers hands on the wheel rather than autopilot but still likes the look and feel of an ETF, an actively managed commodity index ETF may be for you. We suggest taking a look at is SummerHaven Dynamic Commodity Index (“SDCI”).

Buy the Futures

If you’re looking at your portfolio thinking gold might be a good inflation hedge, it just takes a little bit of math to figure out how many contracts to buy to get your desired exposure. Plus, with the new micro contracts available, it is possible to get even more granular. The CME website has all the information you’re looking for, including the benefits of trading gold futures rather than ETFs.

Buy the Actual Commodity

Eh, probably the most complicated of all the options out there and unnecessary for most of us, but if you’re looking to be in the physical commodity trade, give the experts over RCM Ag Services a call.

The Active Approach

Invest with a Trend Following CTA: The original CTAs (think turtle traders) cut their teeth trading commodities at the old MidAM Exchange. Many of today’s CTAs still have a large exposure to commodity markets. Make sure to ask the portfolio manager how much of their portfolio is in commodities. If it’s not 40% or higher, you’re probably going to need to look elsewhere. Here are our picks to consider; EMC Capital Advisors Classic and Auspice Global Diversified.

Specialist CTAs

There are a bunch of them out there trading everything from milk to soybeans to Malaysian palm oil. Discretionary traders are popular because some have lower minimum investments around $100k vs. trend followers, requiring up to $5m in trading level. You can find most of them in our managed futures database.

Build a Portfolio

Do you like solving puzzles? Combing through databases looking for diamonds in the rough? Mix a systematic approach with a diversified trader? If so, building a portfolio of commodity traders could be for you. There are lots to consider here, including minimum investments, leverage, trading approach, and, of course, manager due diligence. We’ve already done the heavy lifting for you, so it’s best to give us a call to discuss the various investment options.

Invest in a Multi-Manager Fund

RCM has teamed up with the guys over at Mutiny Funds to launch multi-manager funds stacking commodity trends, long volatility, gold, bitcoin, and beta stocks and bonds. The deftly named Cockroach Fund gives investors exposure to markets across the globe. Obsessed with path dependencies, this fund constantly searches for diversification and dynamically rebalances monthly. The fund is available to accredited investors at a reasonable minimum of $100,000

Eight and a Half

Call your RCM broker and ask what is best for you. We’ll review your investment portfolio, make recommendations, and when it comes time to invest, our all-star client relations team will efficiently guide you through the onboarding process.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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