Commodities investments are sometimes dangerous due to the volatility of the underlying uncooked supplies that derivatives contracts are primarily based on or that drive revenues of producers. Demand for uncooked supplies ebbs and flows with financial cycles, and commodities usually carry out effectively originally of increase cycles however then carry out poorly in instances of slowing financial development or recession.

To assist counter this, traders can flip to commodities exchange-traded funds, or ETFs, to achieve single-ticker diversification amongst varieties of commodities or holdings of a number of manufacturing corporations to reduce danger.

A few of these ETFs are mainly wrappers for many completely different futures contracts. Shorter-dated contracts have a greater likelihood of monitoring the underlying commodities.

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