Should you buy commodity trackers?

Commodity trackers are the most complex type of exchange-traded product. So if you're thinking of using them, you really need to do your homework.

Commodity trackers are the most complex type of exchange-traded product. That's a bad thing. Complexity always favours the product issuer and works against an uninformed investor. So if you're thinking of using them, you need to do your homework.

Take oil trackers. If you'd predicted a rebound in the price of crude oil from its 2009 low of $31 a barrel, you'd have been spot on. But if you'd bet on it using an oil exchange-traded commodity (ETC), your return would have fallen far short of the oil price's gain because of 'contango'.

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Paul Amery

Paul is a multi-award-winning journalist, currently an editor at New Money Review. He has contributed an array of money titles such as MoneyWeek, Financial Times, Financial News, The Times, Investment and Thomson Reuters. Paul is certified in investment management by CFA UK and he can speak more than five languages including English, French, Russian and Ukrainian. On MoneyWeek, Paul writes about funds such as ETFs and the stock market.