Commodity Mutual Funds
A mutual fund is a fund managed by an investment professional on behalf of the fund investors. Now, mutual funds by law are constrained to follow conservative trading methods. Mutual funds cannot engage themselves in such sophisticated and risky trading techniques like arbitrage trades, long short strategies and distressed asset investing.
If you want to have a low risk investment in commodities than you should think about buying shares of a commodity mutual fund. There are many different mutual funds like stock funds, bond funds, currency funds and even country specific mutual funds. But there are a number of mutual funds that specialize in investing in commodities or commodity related products.
These commodity mutual funds use different investment strategies. Some of these commodity mutual funds invest in derivates based on commodities such as futures contracts and options based on futures contracts traded on the major exchanges in New York, Chicago and so on.
Other commodity mutual funds may invest in companies that process these raw commodities such as energy companies and mining companies. So how can you invest in these commodity mutual funds? After doing your research on these commodity mutual funds, you can select one that you consider to fit your investment objectives, simply write a check and purchase the shares of that commodity mutual fund either through your broker or directly through the fund providers.
Now I said, after doing your research. The first step in your research should be to compile a list of questions like what is the fund's investment objective, what securities does the fund invest in, who manages the fund, what kind of strategy does the fund uses, what type of people invest in this fund, what are the risks involved in investing in this fund, what is the funds track record, what is the funds fees and expenses and so on.
Once you have your list of questions, see if the fund prospectus answers these questions satisfactorily. The good thing is that most of the mutual funds send their fund prospectus free! Now the two main commodity mutual funds are the PIMCO Commodity Real Return Strategy Fund and the Oppenhiemer Real Asset Fund. Now PIMCO Commodity Real Return Strategy Fund (PCRAX) is the largest commodity mutual fund in the market with $12 Billion of assets under its management. PCRAX tries to mimic the performance of Dow Jones-AIG Commodity Index by investing directly in commodity linked instruments like futures contracts, forwards contracts and options on futures.
Now as always Morningstar website is a very good resource for doing your research on commodity mutual funds. It can give you a lot of information about these commodity mutual funds such as the latest news, updates, load charges, expense ratios and other useful key data. Morningstar also have got a five star rating system that can be really helpful to you in picking the best commodity mutual fund.
If you want to have a low risk investment in commodities than you should think about buying shares of a commodity mutual fund. There are many different mutual funds like stock funds, bond funds, currency funds and even country specific mutual funds. But there are a number of mutual funds that specialize in investing in commodities or commodity related products.
These commodity mutual funds use different investment strategies. Some of these commodity mutual funds invest in derivates based on commodities such as futures contracts and options based on futures contracts traded on the major exchanges in New York, Chicago and so on.
Other commodity mutual funds may invest in companies that process these raw commodities such as energy companies and mining companies. So how can you invest in these commodity mutual funds? After doing your research on these commodity mutual funds, you can select one that you consider to fit your investment objectives, simply write a check and purchase the shares of that commodity mutual fund either through your broker or directly through the fund providers.
Now I said, after doing your research. The first step in your research should be to compile a list of questions like what is the fund's investment objective, what securities does the fund invest in, who manages the fund, what kind of strategy does the fund uses, what type of people invest in this fund, what are the risks involved in investing in this fund, what is the funds track record, what is the funds fees and expenses and so on.
Once you have your list of questions, see if the fund prospectus answers these questions satisfactorily. The good thing is that most of the mutual funds send their fund prospectus free! Now the two main commodity mutual funds are the PIMCO Commodity Real Return Strategy Fund and the Oppenhiemer Real Asset Fund. Now PIMCO Commodity Real Return Strategy Fund (PCRAX) is the largest commodity mutual fund in the market with $12 Billion of assets under its management. PCRAX tries to mimic the performance of Dow Jones-AIG Commodity Index by investing directly in commodity linked instruments like futures contracts, forwards contracts and options on futures.
Now as always Morningstar website is a very good resource for doing your research on commodity mutual funds. It can give you a lot of information about these commodity mutual funds such as the latest news, updates, load charges, expense ratios and other useful key data. Morningstar also have got a five star rating system that can be really helpful to you in picking the best commodity mutual fund.
About the Author:
Mr. Ahmad Hassam is a Harvard University Graduate. Trade Dow Futures . Learn Commodity Trading ! You can get a unique content version of this article from the Uber Article Directory.