Commodities - like gold, silver or oil - can be used to add diversification to a portfolio of shares and funds as their value often rises when traditional asset prices are falling. There are two main ways of investing in commodities, Exchange Traded Commodities (ETCs) and buying shares in companies which mine or produce the commodity.
We believe the easiest, cheapest and most direct way to invest in a commodity is with Exchange Traded Commodities (ETC).
What are Exchange Traded Commodity (ETCs)?
ETCs track the performance of a commodity after factoring in annual management fees. They can be bought and sold on the stock market just like a normal share, and most can even be held in an ISA. This makes them easy to buy and sell while also removing the need for arranging storage and insurance – which can be costly.
There are two ways an ETC can track the price of a commodity; either physically holding the commodity or by investing in complex derivatives.
Physical ETCs are commonly used when investing in precious metals such as gold or silver, with the metal bars held securely in a vault. However, this isn’t possible for many ‘soft commodities’. Wheat, for example, would spoil if held for any length of time and the cost of storing millions of barrels of oil would be prohibitive. These ETCs will use derivatives to track performance, although they are generally only suitable for sophisticated investors.
|WisdomTree Physical Gold (GBP)||12,268.50p||-0.12|
|WisdomTree Physical Gold||$170.30||-0.13|
|iShares Physical Metals plc Physical Gold ETC||2,531.50p||-0.06|
|WisdomTree Physical Silver||$23.18||0.82|
|WisdomTree Physical Silver (GBP)||1,672.18p||0.98|
|WisdomTree Silver 2x Daily Leveraged||$7.63||1.90|
|WisdomTree WTI Crude Oil||$6.57||0.65|
|WisdomTree Brent Crude Oil 1mth||0.00p||0.00|
|WisdomTree Brent Crude Oil||$31.03||0.26|
Information based on exchange traded products held by Hargreaves Lansdown's clients with details correct as at 31 August 2016. Prices delayed by at least 15 minutes.
How to buy ETCs
It’s easy to buy ETCs and many other investments through Hargreaves Lansdown. They can be dealt online just like other shares, and held in the Fund and Share Account, Stocks and Shares ISA or a SIPP. It costs a maximum of £11.95 per deal to buy and sell online and you could pay as little as £5.95 per deal if you trade frequently. More about our charges.
If you're not sure which account to invest in, find out which account is right for you.