Commodity ETFs give investors the chance to play the commodities market like they were never able to before, now even part time investors are able to get a piece of these quickly evolving markets. For some, this access was not diverse enough, and demanded leveraged ETFs as an advanced way of investing, where the fund will work to double or some times even triple the outcome of an index. These funds are not recommended for the part time or risk averse investor, but as one of the largest growing sectors in commodity investing, it seems clear some are ready to take on the leveraged risk [for more commodity ETF news and analysis subscribe to our free newsletter].
Below, we outline the five most popular leverage commodity ETFs for investors to take a closer look at.
Ultra Silver (AGQ)
With $973 million in assets, this ETF has almost double the funding of the second most popular levered commodity product. This fund works to double the daily performance of silver bullion, as measured by the U.S. Dollar. Silver is one of the more volatile commodity options available , so it is no surprise that after a strong summer there two funds on this list with a silver focus. Last year alone saw AGQ peak at $180, only to drop to $80 within the month and land at $40 not long after. Clearly a holding in silver will not help any investor sleep at night, but with a current YTD of 40% and over 1.8 million shares traded a day, it looks like there are many people out there willing to toss and turn to get a share of the returns.
DB Gold Double Long ETN (DGP)
This ETF is designed to reflect the performance of chosen gold futures contracts plus the returns from investing in 3 month T-bills. With just under $600 million in total assets, DGP is the largest gold leveraged commodity ETF out there, and currently one of the best performers with a YTD of 26%. This ETF has out performed the S&P 500 every year since its inception in 2008, but this could partly be due to the fact that gold is always in high demand when markets are bad. Investors should look to see how DGP does as countries around the world stand on the edge of recovery or collapse [see also Ten Tell-Tale Signs You’re a Gold Bug].
Ultra Gold (UGL)
Another gold fund on top, UGL measures the daily performance of gold bullion as measured by the US dollar and tries to double it. This is the second of the three ProShares funds in the top five, the others being Ultra Silver and Ultra DJ-UBS Crude Oil in fourth. This fund has the lowest trading volumes of any on this list, with 213,000 shares traded each day, even with almost $390 million in assets. Like other gold ETFs, the best years for this fund were in 2009 and 2010, when fear of a government fiasco was highest and stocking up on gold was a popular concept. With a very respectable current YTD of 23%, investors looking for gold investments with futures contracts should take a second look at this winning ETF.
The only leveraged oil fund to make the cut, UCO currently sits at $368 million in total assets. The other major differentiating factor about this fund is that if has a negative YTD of -25%, and has been down overall since inception. Even with this discouraging track record USO is still a popular trading instrument as it exchanges hands more than 2.6 million times each day. UCO will be a very volatile play, but for those looking to speculate on crude in a big way, it may just be your best option [see also 25 Ways To Invest In Crude Oil].
3x Long Silver ETN (USLV)
Taking a much more volatile road than our other silver fund, AGQ, this ETF tracks future contacts and works to triple the results of these contracts. Investors who had the foresight to play silver and invest in USLV have been greatly rewarded, with the highest YTD of any of our large asset leveraged commodities at 55%. Along with this great return, you also get the highest expense ratio at a whooping 1.65%, close to doubling the others listed. This fund is only a year old, and already it has almost $130 million in assets and a over a 1.1 million shares are traded each day. Investors looking to gamble on silver should look into this highly risky but lucrative ETF.
Disclosure: No positions at time of writing.