The second way to gain exposure to commodities would be to use commodity stocks, and since I am top-down, and not a stock picker, for me this means using Sector ETFs.

The approach I use here is to simply use an equal-weighted basket of the largest ETF for the 4 major sectors within commodities: Energy $XLE Gold/PM Miners $GDX Base Metal Miners $XME and Agri $MOO — again I am using total returns in the chart below so i.e. including dividends reinvested.

As you can see on first glance they track very closely during the 07-2015 period, but then commodity stocks pull ahead (partly thanks to global equity bull market, so a bit of equity beta, but also the volume effect and dividends: sometimes though commodity producers will lag behind e.g. due to excessive investment into capex, cash-flow pressures during downturns etc).

The other stand out and point to note is the dips down in the red line — those are basically stockmarket panics e.g. 2008, 2020, and were quickly unwound.

But the key point is that commodity stocks are also a decent, also imperfect, but at least historically better(disclaimer: past does not equal future)way to get exposure to commodities.

[also, general disclosure, this is not financial advice nor a solicitation to buy securities, this is general information]

One more thing though…. (click below)