Commodity funds invest in a wide variety of items such as energy, agriculture, metals, livestock, and timber through the use of futures, stocks, and other financial instruments.

Investors should understand that because of the complex financial methods used by commodities funds, they may have more risk than simply the value of the underlying assets.

One of the most notable characteristics of commodities from a portfolio perspective is the general low correlation to both stocks and bonds.  While volatile on their own, this low correlation means that adding commodities to a diverse portfolio can help reduce volatility overall.

Index Funds

• iShares: GSG
• Other: PCRIX