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Energy, Silver, Crude Oil ETF Analysis | Mining Commodities ETF's Path to Fortune

Cattlemen who are interested in financial hot spots may have noticed that the recent momentum in precious metals and commodities has been quite strong. In contrast, the ETF in question is also bullish.
Gold and Precious Metal Blocks
Gold and Precious Metal Blocks

Why are bulk commodities worth paying attention to?


First, commodity price volatility is usually unrelated to traditional asset classes, such as stocks and bonds, which can reduce the overall risk of a portfolio. Second, higher commodity prices help hedge the risks of inflation and protect the real value of the portfolio. In addition, supply relationships have a greater impact on commodity prices, and investors can gain investment opportunities by keeping an eye on the supply situation.

So, why choose ETFs to invest in commodities?

Investing in commodity ETFs is favored by many investors because:

  1. It achieves the purpose of risk diversification by combining multiple commodity assets and maintaining high liquidity and low thresholds in exchange-traded transactions;

  2. Compared to investing directly in futures or derivatives, ETFs require lower management costs and transaction fees and are managed by a professional team, saving investors from dealing with complex issues such as contract showtimes and warehouse logistics;

  3. In addition, ETF position information is made transparent on a daily basis to help investors understand and make informed decisions, while many commodity ETFs closely track commodity indices, enabling investors to fully participate in the performance of the entire commodity market, without being limited to single commodity price movements.

In short, ETFs themselves have diversified characteristics that reduce the risk of investing in commodity futures, options, or stocks. With its many advantages, such as convenience, transparency, liquidity, and relatively low cost, ETFs have become an attractive investment tool for entering the commodities market.

The specifics of commodity ETFs

To understand the specifics of a commodity ETF, let's first clarify what categories it actually includes here —

According to the US stock market, according to Futubull's ETF classification, major commodities include crude oil, energy and precious metals.

(Hint: Go to the Futubull App homepage, click on the top right corner number to enter the ETF page directly to explore different products~)

Among them, especially in precious metals and energy, the recent performance has been particularly outstanding:

Below we focus on a strong ETF under commodities as a whole:

1. Energy ETF

Energy ETFs are ETFs targeting energy-related companies that invest in energy commodities such as oil, gas, coal, nuclear, and other energy.

With the development of the global economy and changes in energy markets, the market size of energy ETFs is constantly expanding. Currently, energy ETFs mainly cover the fields of oil and gas, renewable energy, nuclear, etc. At the same time, the types of ETFs are also becoming more diverse, including leveraged ETFs, reverse ETFs, etc. We will introduce you to some of the best traded energy ETFs:

(1)$First Trust Exch Traded Fund 2 Energy Alphadex Fd Usd(FXN.US)$: First Trust Energy ETF, it is an ETF that tracks U.S. energy companies, designed to provide investments in the U.S. energy industry. The ETF's portfolio includes oil and gas mining, energy services, renewable energy and other energy-related companies. FXN's portfolio covers different areas of the U.S. energy industry, helping investors understand and cover the entire U.S. energy market. Its advantages include a wide portfolio, risk diversification, low cost rates, etc. However, FXN also has industry and market risks in the US energy market.

First Trust Energy AlphaDex Fund (FXN.US)

(2)$United States Natural Gas(UNG.US)$It is known as the United States Natural Gas Fund, LP. A tradable fund, the ETF's investment strategy is to make a tracking investment in gas prices by investing in gas futures contracts. Natural gas prices may rise in the event of increased seasonal demand such as winter, resulting in investment opportunities. However, due to the large volatility of natural gas prices, UNG's investment risk is more suitable for risk-tolerant investors.

U.S. Natural Gas ETF (UNG.US)

(3)$iShares Global Clean Energy ETF(ICLN.US)$: Fully known as iShares Global Clean Energy ETF. The ETF's investment strategy is to invest in assets in global renewable energy companies, including solar, wind, hydropower, and more. It is a better option for investing in the renewable energy industry. THE PORTFOLIO IS MORE DIVERSIFIED, COVERING RENEWABLE ENERGY COMPANIES FROM DIFFERENT REGIONS OF THE WORLD. THE INVESTMENT RISKS ARE LOWER AND THE INVESTMENT STRATEGY IS ENVIRONMENTALLY FRIENDLY AND SUSTAINABLE, RESPECTED FOR SOCIETY AND THE MARKET.

Global Clean Energy ETF-iShares (ICLN.US)

Second, Precious Metals ETF


In this article, we will introduce you to the following three highest traded silver ETFs:

(1)$iShares Silver Trust(SLV.US)$: Fully known as iShares Silver Trust, it is a silver-based ETF. Its goal is to earn a return on investment by investing in silver. The ETF invests in silver futures contracts and tracks the movement of silver on the London silver market. SLV is a highly liquid ETF that can be traded easily. However, SLV has a relatively high management fee of 0.50%.

(2)$Sprott Physical Silver Trust(PSLV.US)$: Fully known as Sprott Physical Silver Trust, it is a silver-based ETF, but unlike SLV, PSLV holds physical silver bars rather than silver futures contracts. Investors buying PSLV shares are equivalent to gaining ownership of tangible silver bars. PSLV's portfolio is made up of tangible silver bars, which allows investors to participate directly in physical transactions of silver. However, due to the need for storage and preservation of physical silver bars, PSLV costs more, with a management fee rate of 0.45%.

Sprott Physical Silver Trust (PSLV.US)

(3)$Abrdn Silver ETF Trust(SIVR.US)$: Fully known as Aberdeen Standard Physical Silver Shares ETF, it is also a silver-based ETF that holds physical silver bars. SIVR's portfolio consists of physical silver bars, which gives investors direct ownership of physical silver. SIVR has a relatively low management fee of 0.30%. However, because holding physical silver bars requires storage and preservation, operating costs for SIVR may be higher.

Abrdn Silver ETF Trust (SIVR.US)

In summary, SLV, PSLV, and SIVR are all silver-based ETFs, but their investment strategies and portfolios vary widely. SLV invests in silver futures contracts, while PSLV and SIVR hold physical silver bars. Investors can choose the right ETF based on their investment preferences and risk tolerance.

3. Crude oil ETF

Accordingly, we will select the three most traded crude oil ETFs to introduce you to:

(1)$United States Oil Fund LP(USO.US)$: Known as the United States Oil Fund, it is an ETF that tracks the price of WTI crude oil. The ETF tracks the price movements of WTI crude oil by investing in crude oil futures contracts. The advantage of the USO is that it allows investors to participate in the oil market at a relatively low cost without the need to buy crude oil directly. In addition, USO is an ETF with good liquidity and easy to trade. However, the USO has its drawbacks due to rolling costs, higher market risks, and more due to changes in futures contracts.

U.S. Crude Oil Fund ETF (USO.US)
U.S. Crude Oil Fund ETF (USO.US)

(2)$ProShares UltraShort Bloomberg Crude Oil ETF(SCO.US)$: Fully known as ProShares UltraShort Bloomberg Crude Oil, it is a bearish crude ETF designed to provide a reverse investment in the price of WTI crude oil. The ETF achieves its goals by investing in oil price futures and other derivatives. SCO has the advantage of providing protection against falling oil prices, which makes it an investment tool in oil market downturns. However, SCO also has high risks associated with short-term trading and speculation.

Proshares Double-Done Bloomberg Crude ETF (SCO.US)
Proshares Double-Done Bloomberg Crude ETF (SCO.US)

(3)$SPDR S&P Oil & Gas Exploration & Production ETF(XOP.US)$: The SPDR S&P Oil & Gas Exploration & Production ETF is an ETF that tracks companies in the U.S. oil and gas industry. The ETF's portfolio includes companies such as oil and gas exploration, exploration and production. The advantage of XOP is that it can cover the entire U.S. oil and gas industry, including production, extraction, exploration, and other processes, thus dispersing industry risks. In addition, XOP charges are relatively low. However, XOP also has industry and market risks in which the oil and gas markets compete.

S&P Oil & Gas Mining Index ETF-SPDR (XOP.US)
S&P Oil & Gas Mining Index ETF-SPDR (XOP.US)

Apart from this, there are ETF-related ingredients in the Dai Dai products, due to the size of the size, so you can see for yourself on the Futubull Feeds page.

However, while ETFs are good, there is a point to remind everyone:

For ETFs with futures contracts as underlying assets, performance may differ slightly from actual asset prices — futures contracts include costs such as storage fees, so futures contracts themselves may be higher than spot prices. Its value is not only influenced by the price of the asset itself, but also by additional factors such as the time value of futures contracts, futures exhibition costs.

If the futures contract price already includes the expected spot price increase, then even if the spot price actually goes up, ETF holders may not be able to profit from the price increase.

A commodity ETF with spot underlying assets would do better. Therefore, if you do not want to take risks from other factors, invest in a spot ETF or a more stable and value-for-money ratio.

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Frequency Asked Questions
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