With the current uncertainty in the stock market, it is hard for an investor to determine which asset classes they should invest in. It is really unknown if the stock rally begun in 2009 will continue in 2010. There are still too many unknowns. It is also unknown what will happen to inflation. One of the proven hedges against inflation is investments in commodities. Commodities are those items that come from the ground. They consist of oil, grain, minerals, and food items.

Trading in actual commodities can be quite risky, so the best way to buy commodities for an average investors is to trade in commodity mutual funds if they wish to have an exposure in this asset class. These mutual funds will choose several different commodities to buy shares in. The best known mutual funds are the Goldman Sachs Commodity Index (GCSI), the Oppenheimer Real Asset Fund (QRACX) and the Pimco Commodity Real Return Strategy (PCRAX). These funds attempt to diversify their holdings across many different commodities.

One huge drawback with these funds is their expense ratios. If you are going to invest in these funds, the expense ratio is an important thing to watch. What is it going to cost you to hold these investments? Each of the mutual funds listed above come with expense ratios of over one percent.

Another approach you can take with your investment strategy is to purchase mutual funds with ties to specific commodities. For example, you could buy gold, oil, natural gas, or different food mutual funds. This would give you a greater opportunity to watch the expense ratio since there are more choices to pick from within the specific commodities sectors.

Another choice you can look at is exchange traded funds (ETF) which are very similar to mutual funds. They will also give you a chance to diversify across many different commodity sectors. The different investment choices are detailed at Morningstar.com. This source can give you information on ratings and expense ratios for the different funds available.

Related posts:

  1. Commodity ETF is the growing concern for investors
  2. Three Primary Reasons Why Thousands Particpate in Commodity Day Trading
  3. No Load Mutual Funds Are Not Just For Grandpa
  4. Small Cap Value Funds – Good Investing Strategies
  5. Exchange-Traded Funds – a Few Reasons Every Portfolio Should Have Them

« »