A Compelling Idea Among Commodities

When it comes to commodities, plenty of investors are familiar with gold and oil, but there are times when other, less heralded commodities outperform bullion and crude. Of course, knowing when a particular commodity will fall out of favor and when it will be a leader is difficult.

So there are advantages to a diversified commodities exchange traded fund, such as the WisdomTree Continuous Commodity Index Fund GCC, which tracks the Thomson Reuters Equal Weight Continuous Commodity Total Return Index. An ETF like GCC can be particularly useful during periods of commodities volatility or when the asset class swings between various extremes as it did last month.

“While the overall month was positive, the index was filled with extremes. Lean hogs and feeder cattle are having their 2nd worst months in history, the worst since Dec. 2003 and Aug. 2002, respectively.  This drove livestock to return its 7th worst month ever since Dec. 2003 when it lost 15.8%.  On the other hand, sugar and lead each posted 11.3% gains this month,” said S&P Dow Jones Indices in a recent note. 

GCC offers investors exposure to seven sub-sets of the commodities space: energy, grains, industrial metals, livestock, natural gas, precious metals and softs. Within the ETF, investors will find familiar fare such as gold, oil and silver along with more obscure commodities, such as cocoa, coffee and a sugar.

“Commodities are on pace to have several big winners and losers this year.  Thus far gold and zinc are set to have their 3rd best years in history while feeder cattle is set to post its worst year.  Below is a table of commodities that are closest to be on pace for record setting years. Although natural gas is having one of its best years, it is still negative – it has only ever been positive six times through the year at this point,” adds S&P Dow Jones Indices.

Another advantage is that it equal weights its lineup, which limits the contributions, negative and positive, an individual commodity makes toward the ETF's performance. Additionally, the ETF's rebalancing frequency ensures commodities that are seeing increases in volatility are limited or pulled from GCC's lineup.