Commodity ETFs can provide an important layer of diversification for your portfolio.
Ready to move your portfolio beyond stocks and bonds? A commodity ETF may be your next investing move. Commodity exposure adds a layer of diversification to your portfolio, which you may appreciate the next time stock prices weaken.
Below is an overview of the advantages of commodities and commodity ETFs, plus an expert-recommended asset allocation. That’s followed by an introduction to six high-performing funds to research as potential options for your portfolio.
Why Invest In Commodity ETFs?
In an interview, Doug Greenberg, principal wealth advisor with Pinnacle Wealth Advisory, explains that commodities show their worth “during periods of inflation, supply-demand imbalances or early economic expansion.” This behavior can add an important layer of diversification to your portfolio.
For example, inflation can limit consumer spending and, in turn, stifle corporate earnings and stock prices. But while that’s happening, gold, oil and industrial metals can become more valuable. This offsetting behavior can help you manage the impact of the market’s most extreme cycles.
To access the hedging power of commodities, you can buy physical products, trade futures contracts or add a commodity fund to your ETF portfolio. The ETF route is the simplest option. You won’t have to store gold bars in your garage or learn the nuances of futures contracts. You simply hold your commodity fund in your brokerage account, like any other security.
How Much To Invest
Greenberg acknowledges the role commodities play in a well-balanced portfolio while advising caution with this asset class. “Unlike stocks or bonds, commodities are highly cyclical and can be more volatile,” Greenberg explains. Factors like economic uncertainty and policy changes can easily prompt big reactions from the commodities markets.
Given the current environment, Greenberg recommends a thoughtful commodities allocation of 1% to 3%. “Within that range, it’s all about being selective,” Greenberg continues. “I’d focus on energy, precious metals, industrial metals and agriculture.”
Criteria Used For Selecting These Commodity ETFs
There are many ways to screen for commodity funds. The six commodity ETFs introduced in the next section were identified by screening on these criteria:
- Commodity-focused strategy: Each fund either focuses on one commodity type or invests in a diversified selection of commodities.
- Income-generating: Commodity values can fluctuate unpredictably. A regular cadence of distributions eases the sting of price volatility and encourages longer holding periods. The yields are high relative to more conventional income-investing ETFs. This compensates you for the added risk of commodity investing over, say, dividend-paying blue chips.
- Three-year average annual return of 10% or more: Double-digit growth over multiple years suggests a more enduring commodities strategy.
- Expense ratios below 1%. You can find S&P 500 ETFs with expense ratios below 0.10%, but commodity ETFs are a different animal. In this space, expense ratios commonly stretch up to 1% or more. Expense ratios on the selected funds below range from 0.45% to 0.93%.
ETFs meeting the above parameters were ordered from highest to lowest three-year return, and the top six funds were selected. Coincidentally, all six selected funds have returned 20% or more over the last year.
6 Top Commodity ETFs For 2025
This table presents six commodity ETFs, with net assets and a strategy overview for each. A closer look at each fund follows. For more investing ideas, see best ETFs for 2025.
1. WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN)
- Net asset value: $37.60
- Three-year return: 17.15%
- Expense ratio: 0.45%
- Distribution yield: 7.14%
- Distribution cadence: Semi-annual
WisdomTree Efficient Gold Plus Gold Miners Strategy ETF Overview
This gold fund from WisdomTree combines market cap-weighted gold mining stocks with gold futures contracts. For every $100, the fund invests $90 in gold mining stocks, $10 in U.S. Treasuries and $90 in leveraged gold futures.
Why GDMN ETF Is A Top Choice
GDMN provides comprehensive exposure to gold that would otherwise require two transactions, one for the stocks and another for physical gold. This ETF is an efficient choice if you intend to implement that two-tier strategy.
Historically, gold mining stocks tend to follow gold spot price trends, sometimes with more upside than physical gold. Larger gold mining stocks also pay dividends, which contributes to GDMN’s income metrics. Relative to traditional dividend ETFs, GDMN’s 7.14% distribution yield is quite strong.
Note that GDMN uses debt, which magnifies gains and losses. The strategy has been productive recently, since gold’s value has generally been trending up since 2016. Should the gold spot price take an extended downturn, this fund would take a hit. Consider that outcome carefully before investing.
2. USCF Gold Strategy Plus Income Fund ETF (USG)
- Net asset value: $31.98
- Three-year return: 14.62%
- Expense ratio: 0.47%
- Distribution yield: 7.01%
- Distribution cadence: Quarterly
USCF Gold Strategy Plus Income Fund ETF Overview
This USCF fund invests in gold warrants, which are privately issued options to buy physical gold at specified terms. The fund also invests in fully collateralized gold futures contracts. The cash collateral plus the sale of gold call options generate income that’s distributed quarterly to shareholders.
Why USG ETF Is A Top Choice
The USG ETF is actively managed to align with gold’s long-term performance while providing the added perk of quarterly income. On a NAV basis, the fund’s average annual return since inception is 11.38%. This compares to 12.40% average annual growth in gold futures contracts over the same period, according to a benchmark Bloomberg gold index.
USG’s distribution yield over the last 12 months has been ample, exceeding 7%. However, the income varies from one quarter to the next. In 2024, the quarterly distribution ranged from $0.09 to $1.58 per share.
3. Invesco DB Agriculture Fund (DBA)
- Net asset value: $27.89
- Three-year return: 14.38%
- Expense ratio: 0.92%
- Distribution yield: 3.87%
- Distribution cadence: Annual
Invesco DB Agriculture Fund Overview
Invesco’s DB Agriculture Fund currently invests in 10 commodities via futures contracts. Like the previous fund, the contract portfolio is collateralized with positions in Invesco government and agency debt, U.S. Treasury bills and an Invesco short-term Treasury ETF.
Why DBA ETF Is A Top Choice
DBA provides exposure to agricultural commodities. As primary inputs to the world’s food supply, agricultural commodities have strong, ongoing demand.
The DBA portfolio prioritizes highly liquid, heavily traded commodities. Coffee, cocoa, corn and live cattle are the top four holdings, weighted at 16.78%, 13.95%, 11.82% and 11.81%, respectively. The fund rebalances annually in November, according to changes in its benchmark index, the DBIQ Diversified Agriculture Index ER.
On a NAV basis, DBA has produced a five-year average annual return of 14%. With the help of income from the collateral holdings in that period, the fund outperformed its benchmark by 1.83 points.
4. USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund (SDCI)
- Net asset value: $20.72
- Three-year return: 14.35%
- Expense ratio: 0.80%
- Distribution yield: 5.67%
- Distribution cadence: Semi-annual
USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund Overview
The SummerHaven dynamic commodity fund by USCF invests in 14 equally weighted futures contracts to provide diversified commodities exposure. Live cattle, coffee, copper, natural gas, silver, soybean, sugar and cocoa are represented. U.S. Treasury bills and cash collateralize the contract portfolio.
Why SDCI ETF Is A Top Choice
SDCI provides well-rounded commodities exposure plus semi-annual income distributions at a current yield above 5.5%. The fund has performed well, delivering a five-year average annual return of 13.53%. This compares to 13.81% for SDCI’s benchmark index, the SummerHaven Dynamic Commodity Index Total Return or SDCITR. Another broad commodities index, the Bloomberg Commodity Index Total Return (BCOMTR), showed lower average annual growth of 6.76% over the same period.
5. Invesco DB Precious Metals Fund (DBP)
- Net asset value: $66.95
- Three-year return: 14.11%
- Expense ratio: 0.76%
- Distribution yield: 3.82%
- Distribution cadence: Annual
Invesco DB Precious Metals Fund Overview
Invesco’s DB Precious Metals Fund invests in gold and silver futures contracts. The exposure ratio is 80% gold and 20% silver. Collateral holdings include U.S. Treasury Bills, Invesco Government and Agency Portfolio, Invesco Short-term Treasury ETF and cash.
Why DBP ETF Is A Top Choice
Gold gets more investor attention as a safe-haven asset, but silver has equally interesting qualities. Like gold, silver is a store of value that can protect against inflation and financial market turbulence.
Silver has a larger range of industrial uses than gold, which adds to its inflation-hedging power. Morgan Stanley advisor Statton Frank reports that half of the world’s silver is used in heavy industry and technology. Silver is used to make solar panels, electric vehicles and smartphones. When prices rise during an economic growth period, demand for products that use silver can increase also.
Because Invesco’s precious metals fund combines gold and silver, it may offer a more complete inflation hedge than funds holding gold alone.
6. FT Vest Gold Strategy Target Income (IGLD)
- Net asset value: $19.78
- Three-year return: 10.31%
- Expense ratio: 0.85%
- Distribution yield: 19.70%
- Distribution cadence: Monthly
FT Vest Gold Strategy Target Income Overview
First Trust’s Vest Gold Strategy Target Income ETF provides monthly income distributions plus exposure to the price returns of SPDR Gold Shares fund (GLD). GLD is an ETF that holds physical gold.
To capitalize on gold price returns, the First Trust fund buys long call options and sells short put options on GLD. IGLD also generates income by selling call options on GLD.
Why IGLD ETF Is A Top Choice
IGLD follows a complex strategy to provide investors with two benefits: exposure to the gold spot price plus income. As a general rule, complexity adds risk. Also, since the fund was launched in 2021, its track record is limited to a growth period for gold. And, the fund has actually underperformed gold in that timeframe. The three-year NAV return is 8.44% versus gold’s return of 13.05%, per the LBMA Gold Price benchmark.
The income performance has been more promising. Over the last year, the fund’s distribution yield was an incredible 19.70%. However, a large distribution of $2.40 in December 2024 skews this percentage. All other distributions from early 2023 through February 2025 have ranged from $0.10 to $0.14 per share. Excluding the outsized distribution, the fund’s normalized yield is closer to 7%.
Bottom Line
Commodity ETFs can provide an important layer of diversification for your portfolio. Remember that these funds are riskier than many equity or fixed income portfolios. Set your allocation accordingly—for most investors, it’s best to start small and increase your position slowly as you get more comfortable with how this asset class behaves.